Building Societies (Funding) and Mutual Societies (Transfers) Bill

Read a third time.

Lord Naseby: My Lords, I beg to move that this Bill do now pass.
	Moved, That the Bill do now pass.—(Lord Naseby.)

Lord Davies of Oldham: My Lords, I am conscious of the fact that I am breaking every conceivable convention in making a speech on Bill do now pass apart from congratulating the noble Lord, Lord Naseby, on taking the Bill through the House. Any contribution to a Bill do now pass debate should be brief and to the point. Mine will be to the point but not short. I apologise for that but the Treasury has a close interest in the sector to which the Bill relates.
	Although the Treasury and the Government have fully supported the Bill's passage through the other place and this House, and the noble Lord, Lord Naseby, deserves the thanks of the whole House for the way in which he has conducted it, it would be remiss of us not to comment on it, given that it relates to issues which were the subject of yesterday's significant Statement by the Chancellor of the Exchequer. The Bill proceeds through this House after a period of significant market instability. As the Chancellor said yesterday in the other place, the Government are undertaking a review of the framework of depositor protection, and will introduce legislation in the next parliamentary Session. However, these reforms will take time and the Government are clear that they must balance the need for urgent action in the light of recent events with the need to consult as widely as possible.
	In the interim, this Bill comes at an opportune moment. It introduces helpful amendments to building societies legislation. First—in the Government's view, this is the Bill's most important improvement—it allows society members to be put in the same position in the event of insolvency as other creditors instead of taking a subordinated position as they do now. This will provide an important additional consumer protection until such time as changes can be made to the broader depositor protection framework. This measure will be implemented by an order made under the power in Clause 2, which is not dependent on anything else in the Bill.
	Secondly, the Bill allows flexibility for the future in relation to wholesale funding, as the Treasury would be able to use the power in Clause 1 to increase by order the maximum level which building societies can borrow from the wholesale markets to 75 per cent. Clearly, in the light of recent events in wider financial markets, we will want to consider carefully whether such a power should be used—and this Bill provides ample scope for scrutiny. Such an order will require affirmative resolution, ensuring that there is a full debate in both Houses before the measure is implemented. The order can be made only once the position of members on insolvency has been equalised.
	The Bill will also make it easier for one type of mutual society to transfer to the ownership of another type of mutual society as a subsidiary company while retaining important elements of mutuality; for example, voting rights for the individual members transferred to the new company. The mutual insurance companies and the equivalent European mutuals will be included as a result of the amendments discussed and agreed in Committee. The Government welcome this opportunity to update the legislation on building societies and other mutual societies. We are sympathetic to the reforms that are being introduced, particularly as they have the potential to benefit members of mutuals significantly. The Treasury will consult in due course on the secondary legislation that will implement the policy behind this Bill.
	In view of recent events in the banking sector I will make a few comments about the Government's policy on wholesale funding and building societies. The increase in access to wholesale funding for building societies will provide them with more flexibility in financing their mortgages. However, the concentration of funding will also pose risks that need to be effectively managed by firms. The recent case of Northern Rock is a clear example of the importance of risk management in this regard, where the firm's reliance on wholesale funding and securitisation meant that it was particularly affected by the recent market turbulence and faced liquidity problems as a result.
	The purpose of the change is to place building societies on a level playing field with banks in access to wholesale funding. This is consistent with the recommendations of the Miles review and the proposal that long-term mortgages be facilitated by building societies having greater access to wholesale funding. The effect of the Bill is to provide the means to greater freedom for societies to reach new and wider markets as they develop. There is no requirement that societies should operate at the proposed maximum level. It will remain for the society to manage its liquidity risk appropriately, and one important factor it will wish to consider is the appropriate balance of member and wholesale funding. This Bill simply gives them greater scope to manage that risk as they see fit, still subject to the full prudential regulatory requirements of the FSA that I will outline in a moment. Societies may choose to alter their funding level as their members' needs dictate, within the existing or revised limits. The Bill also gives the Treasury the option of requiring societies to obtain a members' resolution before exceeding the 50 per cent wholesale funding.
	Within the scope of its principles-based regulatory regime, the FSA has a range of powers available, should it consider that a society is taking an inappropriate risk in its funding approach. It should be noted that, unlike banks, building societies also have statutory constraints placed on them under the Building Societies Act. As a result, the Government consider that there will be sufficient safeguards in place at the time the wholesale funding limit is extended.
	I appreciate that this is an extraordinary intrusion on a Bill that the Treasury has backed all the way through. It is a very late contribution, and I apologise to the House for that. The Treasury and the Government are fully behind the Bill and are grateful to the noble Lord for the way in which he has conducted it through the House, but it would have been inappropriate for the Bill to have gone through without the Government making some statement in the light of what was said yesterday. I apologise to the House for breaking all known requirements with regard to the procedure on the passing of a Bill, but I hope that it will be understood on this occasion that it is meant to be helpful both to us and to the wider community.

Baroness Noakes: My Lords, I am very grateful to the Minister for the statement that he has just made and to the Government for continuing to support the Bill and for not taking fright at the last minute. This is an enabling Bill, and no individual part of it need be brought into effect if it were thought to be inappropriate. We had a discussion yesterday and I do not want to repeat that, but it is very important that the Government satisfy themselves on the effectiveness of the FSA's regulatory oversight procedures for building societies before extending the powers in relation to wholesale finance. Otherwise, I completely support what the Minister has said.

Lord Newby: My Lords, I am grateful to the Minister for explaining the Government's position. We might have found it helpful to have had some advance notice of this statement, not least because we discussed this yesterday. While it is obviously very important that the mutuals do not go on a wild, reckless spree, the problem in the banking sector does not rest with the mutuals. Many of us feel that if fewer mutuals had not demutualised, the banking sector would be more diverse and rather safer for many investors. However, we take note of what the Minister said. We support the Bill, and we look forward to future consultation.

Lord Naseby: My Lords, I do not really want much of a right of reply other than to say that I am most grateful to all sides of the House for the help that they have given in seeing this Bill through and for the amendments that we have taken on board. On reflection, it appears to me that the Bill is even more apposite now than when it started its life in this House.
	On Question, Bill passed, and returned to the Commons with amendments.

Economic Sanctions: (EAC Report)

Lord Wakeham: rose to move, That this House takes note of the report of the Economic Affairs Committee, The Impact of Economic Sanctions (2nd Report, HL Paper 96).

Lord Wakeham: My Lords, although the committee's report on sanctions was published in the summer, the terrible situation in Burma today and the calls from various quarters for tougher sanctions, mean that our debate is very timely. First, I thank my colleagues on the Economic Affairs Committee for their painstaking work on our report. As usual, the report is evidence-based and entirely non-party political, and has been agreed by all members of the committee. I also thank our specialist adviser for this inquiry, Dr Eric Herring, as well as our Clerk and his small team.
	I have to say at the outset that I find the Government's response to our report very disappointing. The Secretary of State concedes one important point on exit strategies, to which I shall revert in a moment. But elsewhere in the response, along with a few points where there is room for honest difference of interpretation and judgment, I find a mass of fudge, evasion, and bald assertion, without either substantiation or even any real attempt to engage with the criticism. A few examples of issues raised in the report—not least Burma—will show what I mean. The committee recognised that sanctions, when combined with the use of other foreign policy instruments can, on occasion, contribute to the achievement of objectives. However, we also heard a great deal of evidence that sanctions were often ineffective or, worse, counterproductive. Burma may well be an example of counterproductive sanctions.
	We stressed the likely severe human cost of comprehensive sanctions, as in Iraq, and argued that the application of such sanctions is not compatible with the Government's own principle that sanctions should,
	"hit the regime rather than the people".
	The Government's response on this point is simply that severe suffering is not inevitable, that humanitarian exemptions can help to reduce the suffering in some degree, and that anyway it is the target Government who are to blame. None of those points seriously addresses the argument in the report, which demonstrates the very high likelihood that comprehensive sanctions on a ruthless Government will indeed lead to great suffering among the people, as in Iraq. The Government do not address the point that such sanctions are not compatible with their own principle of not hitting the people. It appears, unfortunately, that the Government are ready to discard that important principle when it is convenient to do so.
	Moreover, the Government reject our recommendation that some public account should be given of the United Nations' assessments of the humanitarian impact of sanctions. No reason is given. Presumably one reason is to avoid embarrassing public criticism. I hope that the Government will think again on this. Without giving succour to target regimes, some public accountability in this area is essential.
	The committee heard evidence that sanctions are,
	"often imposed in an ad hoc fashion in a rush".
	There is little sense of how the objectives are to be achieved or of how sanctions will help. The conditions that the targets of sanctions need to meet to have them lifted—the exit strategy—are often too poorly worked out. The Government's response is that since the 1999 Whitehall review, sanctions have had clearly stated objectives including an exit strategy. The progress in the development of clear objectives is welcome. However, our report stressed also the importance of having realistic objectives as well as a strategy for achieving them. On both counts, serious doubts remain.
	On exit strategies, the Government concede that those for EU sanctions,
	"have not always been as explicitly stated as we would like".
	But we found little evidence that the exit strategies existed at all. In any case, some sanctions still in place originate from before the 1999 review. For example, sanctions have been in place against Burma for more than 10 years with no discernible impact in terms of progress towards democracy and respect for human rights. Indeed, in some ways, the situation has deteriorated. Meanwhile, little seems to be known about how hard the sanctions are hitting the Burmese people. The Government maintain that the sanctions are targeted against the military regime with little humanitarian impact. Important measures such as the strong discouragement of trade and tourism are said to be not formal sanctions. This entirely misses the point. The effect is the same—to hurt the Burmese people.
	We were fortunate to be able to take evidence from the Minister of State in the Foreign Office. Dr Kim Howells said he felt "deeply uneasy" about the sanctions on Burma, which, he said, were "not working very well". These comments contrast sharply with the Government's complacent response now. They describe current policy towards Burma, including the sanctions, as "appropriate". Dr Howells also called for,
	"a much more vigorous international debate",
	about how Burmese sanctions can be made more effective. Such a debate would almost certainly be served by a proper inquiry into the sanctions, as has been suggested by the committee. I very much regret that the Government have rejected the committee's proposal.
	The Government argue that the sanctions on Burma are already subject to internal EU review each year. But these EU reviews are not made public and it is entirely unclear what, if anything, they are achieving. Perhaps the Minister will enlighten us later. Since the Government's response to the committee's report, the world has witnessed the brutal military crackdown against protesters across Burma. This has led the Prime Minister and others to call for renewed sanctions. The need for effective actions against an appalling regime and to help Burma move towards democracy is evident. But, as our report shows, sanctions against Burma have been an utter failure. Indeed, they may quite possibly have been worse than a failure. In attempting to put pressure on the regime, they may have made it even more recalcitrant.
	Of course, there is an evident political dimension and, indeed, a moral one to the situation in Burma, as elsewhere. The regime is so repugnant, and the plight of the people so dreadful that every political and moral instinct calls for urgent and effective action that reflects our outrage. But there lies the dilemma. Sanctions may appear a strong response, but do they work? All the evidence on Burma says no. It is evident that a serious examination of the effectiveness of the sanctions, and of other possible measures, is needed before new sanctions are introduced, however politically attractive these may appear. However, I recognise the difficulties in finding a productive way forward. The last thing the long-suffering people of Burma need is measures that make an awful situation even worse.
	The Minister stressed in the House earlier this week the recent change in the position of Asia, which had previously, "turned a blind eye", as he vividly put it. He saw this as significant. But I hope he will forgive me if I remain sceptical. The underlying geopolitical and economic realities behind the regional interest in Burma and the consequent "blind eye" remain unchanged.
	Turning to North Korea and Iran, our report argued that reliance on sanctions as the main means of resolving the current disputes was a recipe for failure. The Government claim that sanctions on North Korea are a success. But the alternative view put forward in our report seems to me far more plausible: that the key factor in achieving the agreement in February this year was the change in the Bush Administration's position in recognising that a policy of reliance essentially on coercion would not work and that incentives were needed.
	On Iran, our report argued that the key strength of the EU's proposed framework agreement was its emphasis on incentives rather than sanctions and its key weakness was the lack of US support. The Government say that US support is "implicit". But full support remains lacking and the situation clearly remains extremely difficult, not to say dangerous, as the French Foreign Minister was pointing out in the strongest terms only last month.
	Finally, I am sorry that the Government are not ready to introduce regular parliamentary review of sanctions, as we proposed. However, I welcome the Government's commitment to expand their annual Written Ministerial Statement to Parliament to include the objectives for each sanctions regime. These Statements should also address the question of how far each sanctions regime is achieving its objectives, what changes in policy, if any, are required, and the exit strategy. I hope that the Minister will confirm that this ground will be covered in the annual Statements.

Lord Hamilton of Epsom: My Lords, would my noble friend agree that one of the problems in Burma is the thriving drugs industry in the north of the country from which the military regime benefits? Therefore, it has no shortage of money, while everyone else in the country does.

Lord Wakeham: My Lords, my noble friend is probably right and many factors such as that support our complaint that the sanctions regime is not working. That is evident from any examination of the situation. I beg to move.
	Moved, That this House takes note of the report of the Economic Affairs Committee, The Impact of Economic Sanctions (2nd Report, HL Paper 96).—(Lord Wakeham.)

Lord Hannay of Chiswick: My Lords, this report and debate are very welcome. The impact of economic sanctions is an important and highly topical subject. As the report points out, since the end of the Cold War, the international community as a whole, acting under the charter of the United Nations, has had increasing recourse to what was, until that time, a virtually unused instrument in the diplomatic tool box. Before and since then, unilateral sanctions lacking that legitimacy have been tried on a number of occasions. We have a considerable case history and plenty of lessons to be learnt, if only we are capable of learning them and willing to do so.
	I thank the noble Lord, Lord Wakeham, and his colleagues on our Economic Affairs Committee for this valuable and perceptive piece of work. If I have a general complaint, it is that the report tends to underestimate—perhaps understandably, given that its terms of reference related to the economic impact of sanctions—the potential political effect of sanctions, however modest their economic impact is, and largely to overlook the important consideration that economic sanctions are almost the only rung in the ladder between mere diplomatic action and the use of force. Surely after the experience of recent years we must recognise that the use of force must remain a last resort—perhaps a later resort than it has been in recent years. Looked at in that light, it would be folly to abandon this tool or simply to accept as a given the imperfections and weaknesses revealed by its operation to date.
	The international community needs to have more effective sanctions—not none or ineffective ones—at its disposal if the world is to move closer to being rid of the scourge of war. Nor would the Herculean efforts that countries make to avoid being put under any economic sanctions at all, let alone draconian ones, seem to bear out entirely the view that the noble Lord, Lord Wakeham, has just expressed that light sanctions packages are as ineffective as their critics would make out. Burma is a case in point, with the regime appearing to do all that it can to persuade Aung San Suu Kyi to give up her support for sanctions. Why on Earth should General Than Shwe do that if he thinks that they are totally irrelevant?
	In my view, the report deals fairly with the issue of comprehensive economic sanctions, of which Iraq and Serbia remain so far the sole examples. It identifies the paradox that totalitarian or authoritarian regimes are best able to spare their elites from the impact of such sanctions, to ensure the maximum humanitarian collateral damage and to manipulate domestic and international public opinion to their advantage, and yet it is against totalitarian or authoritarian regimes that they are most likely to have to be used. That paradox cannot be ducked, nor can the fact that attempts to palliate the humanitarian effects of comprehensive economic sanctions will never be fully successful.
	It is tempting, therefore, to conclude, as some witnesses to this inquiry did, that the instrument of comprehensive economic sanctions should never be used again—tempting but, I suggest, wrong. I sympathise with the Government's caution over discarding completely even such a blunt weapon as this. Can we envisage no situations in which comprehensive economic sanctions would be justified and might quite simply have to be used? I am thinking, for example, of the invasion and conquest of one country by another in defiance of Security Council resolutions or the threat of the use of nuclear weapons against a non-nuclear state. I could go on. I am sure that comprehensive economic sanctions should be used, if at all, more sparingly than in the past and with greater emphasis on the humanitarian side effects. To abandon totally their potential deterrent effect would be, I argue, unwise.
	The future clearly lies with more effectively targeted and better implemented limited sanctions. It was a pity that the report did not give a fuller analysis of one of the early cases of such targeted sanctions which actually worked—those imposed on Libya's civil aviation and oil industries as a result of the Pan Am and UTA outrages. The sectors were clearly chosen with care and the action was proportionate; it impacted more on the elites than on the general population and it did bring about, or helped to bring about, policy change. Other cases of targeted sanctions have worked less well, as, one has to admit, have arms embargoes, which have proved notably porous. What is surely essential now is to focus hard on steps to improve the operation of such targeted sanctions. I look forward to hearing from the Minister, when he replies to this debate, just what the Government are doing to achieve that.
	One area of implementation that clearly requires urgent attention is the strengthening of the UN Secretariat's capacity to analyse, identify and help to implement targeted sanctions. Each target country is different and requires in-depth analysis of its weak points. Each target country presents different problems of implementation. But currently there is virtually no capacity to provide an objective analysis of such matters before action is taken and when it is being implemented. Things are left to a tug of war between those on the Security Council who want tougher sanctions and those who want weaker ones. That is no way to get results. In 2004, the high-level panel on which I served made the following recommendation:
	"The Secretary-General should appoint a senior official with sufficient supporting resources to enable the Secretary-General to supply the Security Council with analysis of the best way to target sanctions and to assist in coordinating their implementation. This official would also assist compliance efforts; identify technical assistance needs and coordinate such assistance; and make recommendations on any adjustments necessary to enhance the effectiveness of sanctions".
	Kofi Annan endorsed that proposal. What has become of it? Do the Government support it? If they do, what are they doing to prevent it from being chucked in the dustbin?
	The report also raises the point of the basic ineffectiveness of unilateral sanctions imposed by one country and the capacity of such sanctions to lead to trade disputes following attempts to extend their impact through extraterritorial jurisdiction. US sanctions against Cuba are a classic case in point. Those sanctions have brought about neither policy change nor regime change in Cuba. They have embroiled the US with its allies and they have weakened the US hand at the UN, with successive humiliatingly massive votes against them each year. It is a great pity that Congress does not seem to have learnt the lesson about the counterproductiveness of such unilateral sanctions.
	At the other end of the spectrum, it is clear that economic sanctions imposed by a unanimous decision of the Security Council have by far the greatest political impact. Of course there may be—there often is—a price to be paid in the lower economic impact of such measures, given the compromises needed to achieve unanimity. But that trade-off can be worth making. It is a matter of judgment in each individual case.
	Somewhere in the middle of the effectiveness spectrum are multilateral economic sanctions that do not have the Security Council's endorsement and therefore do not have worldwide mandatory force. Such sanctions would be, for example, those imposed by the EU and US in concert, acting in circumstances in which the Security Council was deadlocked. I do not agree with the view put to the committee by Mr Jeremy Carver that such sanctions should in all cases be avoided. Such sanctions are certainly more effective and less counterproductive than unilateral sanctions imposed by one country. The most important consideration in this case is to achieve the greatest possible unity between the EU and the US and other like-minded countries and thus to maximise the impact and to avoid damaging trade disputes.
	Probably the most important conclusion of the report is one of the simplest and the most political. Economic sanctions are no silver bullet. They seldom on their own bring about the policy changes sought. They need to be operated in tandem with a whole range of diplomatic instruments, including incentives for compliance by the targeted country, a clear statement from the outset of what action is required to get sanctions lifted and a willingness to discuss directly with the targeted country the security concerns that may have led it to take the objectionable action that is being sanctioned. Every one of those considerations is relevant as we contemplate the case for strengthening sanctions against Burma. I agree with some of the remarks made by the noble Lord, Lord Wakeham, on that, although it might be worth pausing for a moment, in criticising the existing sanctions, to think of the message that would be sent out if the international community now lifted sanctions immediately after the scenes in the streets of Rangoon that we saw on television.
	In the light of those compelling considerations, I found the Government's response to the report's recommendations on how to handle Iran's nuclear transgressions pretty unconvincing and limp. The hard fact is that the US is applying this template and these criteria in the case of North Korea and that there are some—admittedly so far incomplete—signs that it is getting somewhere as a result. But in the case of Iran, it is not applying them. US-Iran contacts are so far confined to the problems of Iraq. It is no good saying, as the Government did:
	"The need for explicit text on security assurances ... had been overtaken by the clear and repeated public statements by the United States that, while not ruling out the possibility of taking military action, it was not considering military action and was committed to a diplomatic solution".
	What is needed is not repeated and, I fear, highly ambiguous public statements but direct diplomatic communication. I hope that we will hear from the Government that they will urge this course on the United States as an integral part of any move to strengthen sanctions against Iran. It is absolutely vital that the United States should become a direct participant in a dialogue with the Iranian Government on these issues.
	I conclude with a reiteration of my thanks to the noble Lord, Lord Wakeham, and his colleagues for providing the occasion and such a sound basis for this debate. The subject of economic sanctions will not fade in importance any time soon. It is important that we understand it better, get to grips with its complexities and fashion a more effective instrument for the international community to use when needed.

Lord Lawson of Blaby: My Lords, we are very fortunate in our committee in having in my noble friend Lord Wakeham and Robert Graham-Harrison a chairman and a Clerk who could not be bettered. I thank them both for their help to the committee as a whole in what has proved to be a very timely report and, now, this debate. Incidentally, I agree wholeheartedly with the—admittedly, rather restrained—way in which my noble friend referred to the Government's lamentable reply. I listened with great attention to the noble Lord, Lord Hannay, who seemed to exemplify in the most high-minded way all the major misconceptions about this issue.
	Fundamentally, when we are formulating policy, whether it is foreign or economic policy or anything else, we have to do so in the context of the world as it is and not as we would wish it to be. It would be very nice if there were a rung on the ladder between, on the one hand, doing nothing or taking nothing more than diplomatic action and, on the other, military action. Although there is a whole spectrum of military action, following Iraq, we think that it must mean invasion and occupation. However, it does not; there is a whole range of military action that comes well short of war.
	Nevertheless, the noble Lord is right that there is still a big gap in the ladder between doing nothing and taking military action. It would be very nice if there were something which filled that gap and worked. The trouble is that there is not, and wishing that there were does not make it so. All experience shows that economic sanctions, however well intentioned, do not work. They are invariably harmful to the countries that are sanctioned and are frequently counterproductive.
	Let us take the example of Cuba, mentioned by the noble Lord, Lord Hannay. He admitted that sanctions in Cuba have been counterproductive and seemed to imply that it was because they were unilateral, but that is not the reason. They are counterproductive because they have given President Castro an excuse for the lamentable failures of the Cuban economy and the appallingly low living standards of the Cuban people. Before Castro, living standards in Cuba were among the highest in the whole of Latin America. They are now among the lowest because of the communist economic policies followed by President Castro, which have not been a great success anywhere in the world where they have been tried. But he is able to say, "Look at what America and the world have been doing to us with economic sanctions". That is a large part of the problem. As the purpose of economic sanctions is to damage the economy, it is very difficult to say that they have had no impact at all. It is as certain as anything can be that Castro would not have lasted these past 40-plus years had it not been for the Americans' economic sanctions. The Americans know that too, and that brings us to another point which is characteristic of economic sanctions.
	The Americans know that such sanctions are completely useless and counterproductive, so why do they maintain them? They do so because of the Cuban émigré population in Florida—an important domestic constituency, which would be outraged if the sanctions were lifted. Generally, economic sanctions tend to be imposed not because of an objective view that, in the light of experience, they are likely to achieve their objective—they are not; experience shows the complete reverse—but because there is pressure from either a part or a large sector of the electorate in the sanctioning country that something must be done. Sanctions are applied in response to that. Understandably, there is reluctance to take military action, so the "something" tends to be economic sanctions—not because they are thought to be effective but as a response to domestic political pressure. In my judgment, that is not a good reason for imposing them.
	There is also a point concerning exit strategy, referred to by my noble friend Lord Wakeham, in the context of a regime complying sufficiently to enable sanctions to be lifted. However, in my judgment, there is a rather more serious problem relating to exit strategy about which we need to think long and hard. The noble Lord, Lord Hannay, asked how we could now possibly lift sanctions against Burma, even if they are not doing any good, in the light of what we have seen recently on the streets of Rangoon and elsewhere. That is precisely the point: you are stuck. Once you impose them, you cannot exit because it is seen as a great triumph for the despotic regime which has been ineffectually sanctioned. You are stuck with continuing with the sanctions, even though they are not merely having no effect at all but harming the population. I have no complaint against inflicting some economic hardship on the populations of the countries that have been sanctioned. Economic sanctions must do that; there is no way that they can avoid it.
	There is a curious piece in the Government's response to the report. In the case of Iraq, they say rather plaintively that,
	"it was the Iraqi regime ... who remain squarely to blame for the misuse of resources which was instrumental in causing humanitarian suffering among the general population".
	Did the British Government seriously think that, when sanctions were imposed against Iraq, Saddam Hussein would say, "Well, we've got to tighten our belts. In order to build all the hospitals that are required, I am going to disband the security services, the secret police and the Republican Guard"? No; clearly, when there are economic sanctions, the regime will maintain its spending on whatever is necessary to prop up and support that regime, and the ordinary people will suffer. You cannot seriously embark on sanctions without understanding that that is the inevitable result.
	I return to the question of the exit regime. If causing hardship among the population for a time would ultimately result in the toppling of a despotic regime and far better political and economic conditions for the people, that would be all well and good. However, if it does not result in that, there is no justification whatever for imposing such hardship on the people. You have to be pretty sure that you will have a successful result—which, in my judgment, you cannot be sure of—before you inflict that harm on the people. That harm will go on and on because, as the noble Lord, Lord Hannay, said, once you have imposed sanctions, you cannot lift them. It is that simple and it is another reason why sanctions do not work.
	Let us take another case—Zimbabwe—where there have been no sanctions, but it illustrates the nature of the nonsensical position we are in. We do not need to impose sanctions on Zimbabwe to damage its economy. Mr Mugabe has done that all on his own. Yet the equation is very similar. If he were to give up, it is clear that there would be an international rescue operation to rescue the Zimbabwean economy, so there is huge economic gain from him stepping down and his ghastly regime going away. Do we think that that will happen as a result of the weakness, to say the least, of the Zimbabwean economy? Of course not. If popular disaffection with regimes and economic hardship caused political change, these changes would have happened already in Zimbabwe, Cuba or wherever. But it does not happen. To add to that, and to acquire culpability in the eyes of many in the world through doing it, does not seem a sensible policy, nor does it in the case of Burma, where one of the principal effects of the sanctions has been not merely to harm the Burmese people but to throw the Burmese Government more and more into the arms of China. That is not a great foreign policy triumph either.
	We must live in the real world. It would be lovely if we lived in a world where there was not this missing rung of the ladder. It would be lovely if economic sanctions worked, but experience shows that they do not. They are damaging and counterproductive. The sooner we accept that and persuade our fellow members of the European Union to accept that as a common European position, the better.

Lord Hannay of Chiswick: My Lords, will the noble Lord address the successful case of targeted sanctions against Libya, which he did not mention in all the cases to which he referred where things had not worked?

Lord Lawson of Blaby: My Lords, I am glad the noble Lord reminded me of that because I wished to make that point. It is interesting that the only case that we found unequivocally where sanctions had worked were the sanctions against Libya to cause it to release the suspects for the Lockerbie air bombing. As an aside, it is likely that they were not guilty—at least the proof of their guilt is a little dodgy. Nevertheless, that exemplifies the only case in which sanctions can work—using a sledgehammer to crack a nut. They work only when what you want from the sanctioned Government is so puny or so small that they can surrender it without any great loss of face or power. If you want tiny objectives, you can use this great sledgehammer to achieve them, but for anything bigger than that, you will not do so.

Lord Skidelsky: My Lords, I, too, express my appreciation to the noble Lord, Lord Wakeham, for the invariably good-tempered way in which he conducted the inquiry, and to the Clerk of the Committee, Robert Graham-Harrison for his expert support. I concur with what previous speakers have said about the Government's limp response.
	A key issue with which we as Members of the Committee wrestled was the aims of economic sanctions. Some of us started with the view that the main aim was to get the sanctioned regime to change its behaviour or, at the limit, to overthrow it, but that was far too simple-minded. As the report states in paragraph 7:
	"Sanctions can be applied for a variety of reasons, including to punish or weaken a target, to signal disapproval"—
	which is a key point—
	"to induce a change in policy".
	That comes right at the end of the list. In other words, changing behaviour is only one of several possible objectives which include "signalling disapproval". Another thing we learnt as we went on with our inquiry was that the emphasis in sanctions policy has changed from comprehensive to targeted or "smart" sanctions, as they are called, which are sanctions targeted on the regime and not on the people of the country. It is said that that is to minimise humanitarian damage. Thus in Burma, we have the classic array of smart sanctions, which are part of EU sanctions, including an arms embargo, suspension of high level bilateral visits, and visa restrictions and some financial restrictions on the regime. Roughly the same package applies to Zimbabwe.
	Having received all that evidence, we tried to formulate our report, a process which proved quite long-winded and difficult in view of the natural disagreements that emerged among different members of the Committee. We got together a report that is very coherent and good. Two conclusions seem warranted. The first is that the test of success or failure of sanctions has become extremely fuzzy. As one of our witnesses, Dr. Alexander of Cambridge University, pointed out,
	"it depends what objective you are trying to measure your success by".
	He said that if sanctions are intended to modify regime behaviour they quite often fail, but if their goal is simply to signal moral disapproval, the effectiveness of sanctions might be viewed in a different light. Exactly.
	As I put it in one of my questions to this witness: if the object of sanctions is to signal disapproval, the test of effectiveness is simply the number of states expressing disapproval. On that test, failure almost never happens. States often express disapproval; the success of sanctions is virtually guaranteed, even though nothing else changes. That is an unsatisfactory position.
	The second conclusion dovetails with the first. The shift from comprehensive to smart sanctions is connected with the shift in objective from modifying behaviour to expressing disapproval. The noble Lord, Lord Hannay, called for more effective sanctions. But how do you get more effective sanctions if the aim is to minimise collateral damage to the population? Effective sanctions involve harming the population. The more they are harmed the more effective the sanctions. That was the old doctrine and policy-makers have never admitted in public that there is a trade-off between getting effective regime change and minimising humanitarian damage. In practice, as the noble Lord, Lord Wakeham, pointed out, Governments wobble between the two and find it hard to get a consistent policy.
	Travel restrictions and other pinpricks on leaders of unsavoury regimes do little or nothing to change the way they treat their people, but they do make us feel good, which is extremely important. Symbolic sanctions, in other words, are nicely symbolic of a foreign policy which has replaced resolution by resolutions.
	Like the noble Lord, Lord Lawson, I naturally welcome those parts of the report which are sceptical about symbolic sanctions, and which argue for,
	"greater emphasis on economic, diplomatic and security incentives",
	as a way to modify unacceptable state behaviour. For example, I draw your Lordships' attention to paragraph 20, in which it is stated that,
	"the EU could achieve as much, or more, by a simple declaration of disapproval",
	without any symbolic sanctions at all. People have a right to disapprove; they have a right to state their disapproval; states have a right to state their disapproval. Why accompany that with a panoply of pinpricks which do not do any good?
	I draw attention to the argument of the noble Lord, Lord Renwick, that the,
	"'slap on the wrist' sanctions do more harm than good",
	because they symbolise weakness and the lack of any alternative instrument. Unlike the noble Lord, Lord Hannay, I endorse Jeremy Carver's view expressed in paragraph 24 that sanctions should be used,
	"only where the circumstances fall within Chapter VII of the UN Charter".
	Of course Burma has been strongly in our minds in this debate. I turn to that in the last part of my remarks. In paragraph 135, we urged the Government to,
	"undertake an urgent enquiry into sanctions policy on Burma, with a view to deciding whether it is worth continuing it".
	I do not think that the recent events in Burma have rendered our view obsolete, though as the noble Lord, Lord Lawson, rightly said, it is very hard to lift ineffective sanctions because it then seems to be a retreat from a position that was useless in the first place but now has to be stuck to because of loss of face in withdrawing it.
	One of the oldest debates in international relations is whether you get better government by isolating or engaging a state. There is no general rule which will cover all cases, but the presumption should be in favour of engagement. We should be chary of forcing more isolation on societies whose leaders and populations invariably start off as appallingly ignorant about what goes on in the rest of the world. The more open a society is, the more open it is to change; the more closed, the more it is subject to delusion and paranoia and the easier it is for the leaders of that country to whip up anti-foreign hysteria against the sanctioning power.
	One of the paradoxes of the present situation is that the societies of the West, traditionally champions of openness, are the keenest to enforce pariah status on unsavoury regimes, whereas the previously closed societies of Asia are keenest to trade and engage with such regimes, whether in Asia, Africa or Latin America, China being the main example but of course also India and Russia. They have taken the view that what goes on in Burma is really an internal matter for the Burmese authorities, whereas the international community—that is, us—has called for even stronger sanctions, mandated by the United Nations.
	No-one is suggesting a military attack on Burma. This means that there are only two ways in which other countries can help bring about regime change: first, by cutting off Burma's links with the outside world; secondly, by trying to engage it in some way. The trouble with the first is that the price is usually paid by the people, not the leaders. Also, as long as sanctions are not universally applied, they can be evaded; they will not be universally applied in this situation. The alternative is engagement through commerce and quiet diplomacy. That is the policy of Burma's Asian neighbours.
	Burma is a member of ASEAN. Despite the economic policies of the regime, and in contrast to those of Cuba, Burma is a rapidly growing country. Its growth rate has been about 8 per cent a year for the past several years, and there is a growing middle class. None of these things will make it a democracy in the Western sense, but they will, over time, bring it closer to the norm in much of south-east Asia, in which the military, while still powerful, shares power with elected politicians. In conclusion, the West will continue to voice its moral disapproval, while Asia will silently carry on with the work of change.

Viscount Eccles: My Lords, I, too, welcome this report. Sometimes, when one opts to speak on a committee's report, it feels a bit like intruding on a family party. I shall make a double intrusion because I shall follow the re-engagement, as I would call it, of the noble Lord, Lord Skidelsky, with Burma. It is clear from the committee's report that there was considerable discomfort with the European Community's common position. Strong evidence was put to the committee for an alternative point of view from at least two written submissions. The committee had discussions; it is not too clear from how the committee's proceedings are reported exactly how they went, but at least the committee came to four conclusions and got four replies. The noble Lord, Lord Wakeham, has commented on the replies, and I need say no more on those.
	Events, of course, have moved on: the suppression of the Buddhist monks and their supporters. We must remember that the first serious riots against the military regime were in 1988, almost 20 years ago. Today, there are the first signs of the re-engagement of the international community: the visit of the United Nations envoy. It has always been supposed that it was not possible to get any kind of resolution through the Security Council because of China's position. Yesterday, however, a resolution was passed, supported not only by China but also Russia.
	As far as we here are concerned, Burma is a very emotive subject. The British were in Burma for 120 years. Independence came shortly after the end of the Japanese war. We all remember the stories of the people who got out of Burma at the beginning of that war, and the way that it was conducted and finished. Many of us were also brought up on George Orwell and his book Burmese Days. He was no great supporter of the colonial system, but his book is a fascinating description of the relationship between the British and the Burmese.
	When the Government replied to the committee in July, before the recent disaster and initiatives, what was the position? The United States had always imposed sanctions on Burma with, I think, advice from the British. Much related to the fact that Burma was the number two producer of opium in the world. Europe, with some differences of opinion, could not really see that its vital interests were greatly engaged with Burma, and so we were into the game of disapproval, as self-fulfilling as the noble Lord, Lord Skidelsky, indicated. The World Bank has not had a lending programme to Burma since 1987. The IMF, when you look at its website, really has nothing to say. Interestingly, one of them calls it Burma, the other Myanmar.
	In essence, the West had opted out of Burma. The sanctions are, in my view, irrelevant. What we are watching reminds me of an ancient Greek tragedy. There is a degree of inevitability. The events will unfold. Nobody can do anything about them. The awful generals are the villains of the piece, but also the victims. Nobody knows what to do, so we retreat into disapproval. This in no way measures up to the needs of the Burmese or the interests of the western world. No statistic coming out of Burma can be replied upon, but there are about 50 million people in Burma. It is one of the poorest and most highly indebted countries in the world. It has no significant geopolitical importance to most of the rest of the world. It is not as if it has large oil reserves; it has gas, but not much. You can leave Burma alone and it will not significantly affect the global economy. The annual income per head at official exchange rates on the latest figures—it is difficult to get any figures beyond about 2005—is £100. If you take into account deflators and add in the informal economy, of which opium is of course a large part, you can multiply it by eight: £800 a year. That is the state of play of 50 million people, and averages are averages.
	Burma has 3,500 miles of border with Bangladesh, India, China, Laos and Thailand. Even Bangladesh has refugee camps for Muslims from Burma. India has Nagas who go in and out of Nagaland and Assam. They are irredentist, looking for some sort of independent status within India, and the border is completely porous. Thailand has borders and that it is the number two opium producer in the world is entirely relevant. There are large refugee camps and a major industry in people trafficking. China is acquiring assets—at a heavy discount on the sort of prices that it might pay somewhere else—and raw materials, and it is hardly credible that democracy will come to Burma from China.
	Burma has no independent judiciary, no rule of law and negligible revenues. What options are open to these awful generals? Poverty led to the monks in the streets because the people were not feeding them. The Buddhist monks are fed twice a day by people who give them food, mainly rice. There is, in effect, an opium war, and US pressure is brought to bear on the generals all the time in relation to that opium war. The people of upper Burma do not accept the authority of the Burmese Government—I have no reason to suppose that it would be sensible for them to do so—and the generals have no popular support. Only China is a quasi-friend, and Burma has no international leverage. If it were not for the fact that two-thirds of the population is Buddhist, Burma would already have slid into civil war. The generals have no room to manoeuvre and no way forward to offer. They are simply waiting upon events. Perhaps China, with India, or perhaps Russia will produce some sort of solution.
	Can our policy towards Burma really be just to wait upon events and realistically expect a civil war? We need to do three things after re-engaging the international community—including the West, not just leaving it to Asian countries—as the noble Lord, Lord Skidelsky, said. There are two preconditions: first, there should be carrots as well as sticks; and, secondly, we should set aside our moral disapproval—we can retain it, but we should stop expressing it. The first thing to do is greatly to increase the humanitarian aid programme to Burma. At the moment it is hard to find a figure, but it looks as though it is about $144 million in the latest annual statistics, which is less than $3 per head. Secondly, we should then reopen the dialogue between Burma and the international institutions—not least the UN, but also the IMF and the World Bank—in order to look towards economic development that is supported by Western nations as well as Asian nations. Thirdly, we should organise as early an exit as possible for the awful generals. We know that exits are much more difficult to organise than entrances, as we have already heard today. Sometimes you have to swallow your pride and think of something that has a bit of carrot as well as stick.
	The generals, awful as they are, are Buddhists, and they get older. They must know that they have no solution or way forward and that their tenure is bound to be pretty short. If it is said that this is too much interference in the internal affairs of Burma, the pass has already been sold to the Chinese, who are interfering and, judging from recent United Nations developments, it is right for us to take an interest in what happens to the 50 million Burmese. We need an assurance that we will build upon the United Nation's initiative and that we will put aside our doubts of the past 20 years and get on with helping the people of Burma. It is undoubtedly in our interest to do so.

Lord Ramsbotham: My Lords, I have to admit that my only qualification for contributing to this debate is that at the beginning of this year I was a tourist in Burma. I am extremely glad that I was because without having been there—and I acknowledge all the limitations of being tourist who does not see everything by any means—I could not agree more with the noble Viscount, Lord Eccles, in his summing up of what is happening there and with the plea made by him and the noble Lord, Lord Skidelsky, for active consideration of re-engagement with that troubled country.
	If you have had the experience of seeing something that you reflect upon, you begin to look deeper into the things that you did not see. For instance, I was particularly taken by a visit to the house of Aung San, Aung San Suu Kyi's father. He had a remarkable career that included raising the national liberation army and leading it with the Japanese against us, changing sides and leading it with us against the Japanese and then negotiating the terms of independence with the Prime Minister, Lord Attlee, before being murdered at the age of 34. Reading his description of what he saw for Burma and what Burma needed on the walls of that house made me feel what a terrible tragedy it was for that country that someone with such foresight and vigour had been cut off at that stage.
	I am sorry that his daughter is calling for people not to go and see the country. I believe that the opposite is needed. On my return, I was introduced to and read a book that I commend to noble Lords who have not read it. It is called The River of Lost Footsteps and is written by Thant Myint-U, whose grandfather was the Secretary-General of the United Nations. I later had the pleasure of hearing him lecture at the International Institute for Strategic Studies. I shall read two short extracts that put the case against sanctions for Burma better than I can—after all, he is a Burmese who often visits the country.
	"In 2004 a new sanctions law was enacted by Washington, restricting Burmese imports into the United States and prohibiting almost any payments into the country. The already struggling textile industry was crippled ... In the inner meeting rooms of Rangoon's War Office, the hard-liners saw their paranoias justified and their intransigence easier to defend".
	His book concludes:
	"So what of the future? There are no easy options, no quick fixes, no grand strategies that will create democracy in Burma overnight or even over several years. If Burma were less isolated, if there were more trade, more engagement—more tourism in particular—and if this were coupled with a desire by the government for greater economic reform, a rebuilding of state institutions, and a slow opening up of space for civil society, then perhaps the conditions for political change would emerge over the next decade or two ... There is a second and much worse possible scenario—that Burma's international isolation will only deepen through an unholy alliance between those outside who favor sanctions and inside hard-liners who advocate a retreat from the global community, that this isolation will further undermine institutions of government, that a new generation will grow up less educated and in worse health, and that a decade or two from now, the world will be staring at another failed state, without any prospect of democratic change".
	I do not think that it could be put more starkly or clearly that that. Like the noble Lord, Lord Lawson, I was interested to see evidence of the emergence of China everywhere I went in Burma. Its influence is growing—and clearly that is something that we need to take note of.
	Soon after that a remarkable book fell into my hands, which I am currently reviewing. I bet that this is not on the bookshelf of many people in this House. It is called the US Army & Marine CorpsCounterinsurgency Field Manual. It is one of the most remarkable books I have ever read because it amounts to a total rejection of the way that America has been conducting military operations, particularly since the end of the Cold War. Perhaps I may read two passages from that. First:
	"The most important contribution of this manual is likely to be its role as a catalyst in the process of making the Army and Marine Corps more effective learning organisations that are better able to adapt to the rapidly changing nature of modern campaigns".
	Secondly:
	"This Counterinsurgency Field Manual challenges much of what is holy about the American way of war. Essentially it is rejecting the doctrine of overwhelming force and encouraging people to realise that what is going on is not the typical military confrontation but it is war amongst the people, and, whatever you are doing with any action you take involving another country, it is the interests of the people of that country who must come first".
	What I feel is so disappointing about the Government's response to the admirable report of the noble Lord, Lord Wakeham, which I could not commend more, is that there does not seem to be the same spirit of being willing to learn from changing conditions and listen to evidence of what is going on; rather, they repeated the same old thing about trying to tackle the leaders and so on. Sanctions do not tackle leaders; we all know that. In the spirit of what America is now doing, which could not be more of a revolution, and listening to the words that have been said by many people—I mention in particular the noble Viscount, Lord Eccles—I hope that the Government may consider again their very disappointing response to a very interesting and forward-looking report.

Lord Brennan: My Lords, I, too, thank the committee for this excellent report. I regret that, probably due to their other commitments, only three members of the committee felt able to contribute to this debate, because the topic deserves broad review. The essential feature of sanctions and international politics these days, following the UN charter and to which our country must significantly contribute, is the use of sanctions to reduce or resolve threats to international peace and security. In exercising a sensible critique of sanctions policy and its implementation, that objective must not be forgotten. Article 41 of the United Nations charter states:
	"The Security Council may decide what measures not involving the use of armed force are to be employed"—
	and I emphasise this—
	"to give effect to its decisions".
	It is more than a question of moral disapproval and more than a reaction in international law and politics: it is the desire to achieve a more peaceful world. Therefore, sanctions as an alternative to armed force are a very considerable part of the plan to preserve international peace.
	It is therefore important to emphasise that sanctions should never be treated as a self-contained and sufficient method of pressure for change. The success of sanctions will depend on how they are related to, and wherever possible incorporated with, a policy of offering economic incentives to a country that you want to change, but only if they change: a policy of diplomatic pressure, public or private, spasmodic or continuous; and, in particular, the willingness always to engage in political negotiation. This package of international action will give sanctions a better chance of success.
	If we are to employ sanctions, then I endorse the Government's simple analysis that they must have objectives and a clear scope and there must be an effective exit strategy. It is important, is it not, in view of history, not to confuse sanctions with a concept of comprehensive sanctions such as will damage a country and its peoples in a serious way? Such a sanctions regime has historically been rare. It is therefore conceptually wrong and intellectually unhelpful to look at sanctions from that standpoint only.
	Rather, if we want to impose a means of reducing threats to international peace and security and we do not want to cause humanitarian damage to peoples, we should examine what else we can do. The current jargon is "targeted sanctions". I welcome and endorse them. Efficiently and properly applied, they have an effect—perhaps not a dramatic effect—with less collateral damage. What are they? They include arms embargoes on a country such as Burma, even if other countries will sell arms to it; travel restrictions on the elites and key personnel of the countries in question when they want to travel abroad; diplomatic restrictions; and, above all, financial attack.
	The rapidity with which people at the UN, in Europe and in our country have to consider the introduction of sanctions before they are tabled for general debate requires that there should be a system to make them particularly effective. At the United Nations, as I understand it, our Government are seeking a more coherent and better organised monitoring system. They want continued improvement in the United Nations sanctions committee. They want Europe, through the Union, to have its effect in sanctions—but what about us nationally? That is what I want to concentrate on.
	As the noble Lord, Lord Hannay, says, although sanctions are essentially a UN weapon these days, there may be circumstances in which we require a clear, independent thinking about sanctions. In paragraphs 98 and 99 of this excellent report, that was the request of the committee: let there be a competent system. I have two suggestions.
	The first is to form a sanctions group in this country which is not measured and shaped by ministerial obligations but rather is a collection of efficient and intelligent people with the following objectives. It should establish, first, what is our national sanctions policy; secondly, how do we best identify targets of people and things to chase; and, thirdly, how do we best monitor and control for the future. It should, fourthly, introduce and use experts in economy, finance and international financial transactions and, lastly, seek to ensure that what is produced is going to operate as a fair system in matters such as listing and delisting.
	I make the suggestion from practical experience, which I shall mention in two regards. There is a case in which I am involved but can comment on because it has been publicly reported as to its facts but not the merits. Last year, I was arguing about the impact of Iranian sanctions on a legal process in this country. It transpired that the policy came from the Foreign Office, the restrictions came from a combination of Treasury and the then trade department's civil servants, and, other than the published regulations with their criminal penalties, there was no available statement on how to understand and apply those sanctions policies to Iran. I thought that that was inadequate. It was really saying, "We have decided on it. There is the policy. We have created the criminal offences and that is it". That simply did not represent to me a sufficient ongoing analysis of what was involved.
	The second suggestion is a more determined approach in the financial sector, which is what I am concentrating on. If we look at the Security Council resolutions involving Iran and nuclear development, we find that the controls on finance relate to listed people and state or non-state entities,
	"engaged in, directly associated with or providing support for"
	the purposes, or involving others who are acting on their directions or under their control. That is an extremely broad basis for imposing an order for the freezing of assets. It affects not only the individuals and those mostly connected with them; if you freeze the assets, that affects banks, which have to participate to obey the sanctions order. That is determined stuff and the Government's response states that it produced $94 million from anti-terrorist operations in that field. Much more could be achieved in the quality, if not the quantity of sanctions by targeting the elites of foreign countries or non-state entities as to their assets and finances.

Lord Lawson of Blaby: My Lords, if the noble Lord will forgive me, there is clearly a good case for grabbing the deposits of leaders of despotic regimes, but does he not appreciate that that is not likely to get us very far, because leaders of despotic regimes will in future—to the extent that they do not do so now—avoid depositing in British or American banks and deposit instead in Chinese or Russian banks, or whatever?

Lord Brennan: My Lords, I note what is said, but I do not agree. The ability of not just individuals but non-state or even state entities from a target country to operate internationally depends on the capacity to engage in international financial transactions. The case I mentioned—before I turn to my second point—involved sanctions being applied against several of the main banks of Iran worldwide. That is a very potent weapon in its effect on the country in question. The banks in question in the case were the banks acting for the ministry of defence and armed forces of Iran. That is very effective in affecting their capacity to buy and sell abroad, if there are effective sanctions. So my point is not restricted to the fancy car or house in a particular place but the way in which a target country is operating financially in the international arena.
	It can be done. We have a Proceeds of Crime Act in this country which Parliament has passed, as a result of which there is a system internationally whereby crooks, fraudsters and institutions engaged in such activity can be chased worldwide. In the case in which I was involved, by savage irony, our Serious Fraud Office was dealing with a request from the Government of Iran concerning an alleged fraud to freeze the assets of someone in this country, which then led to the question whether that could be done if they were subject to sanctions. It was an ironic state of affairs, but the main point is that the process for chasing the money is now worldwide.
	I have concentrated on finance because I am simply not prepared to accept that targeted sanctions can have no effect. They may not have total effect, the effect may be modest, but it is significant.
	I turn to my conclusion. If we are to approach the preservation of international peace and security on the basis of principle rather than the primitive, then principle requires a system. A system that operates well should include something more than force. If it is to be sanctions, along with the other things that I mentioned, let them be efficient and let us in this country lead. The committee's report has given us a good basis for reassessing our policy. I hope that the Government will proceed positively in future.

Lord Newby: My Lords, like other noble Lords, I begin by congratulating the noble Lord, Lord Wakeham, and his colleagues on producing a fascinating report and one which has been most timely, given recent events in Burma. I begin by joining his criticism of the quality of the government response. This is what happens every time the noble Lord's committee produces a report: a tremendous amount of work is done, a desultory response comes from the Government and life goes on. Normally the response comes from the Treasury, from which this House expects very little. I am sorry that this malaise, if that is the right word, appears to be spreading to the Foreign Office and I hope that, in his new position, the noble Lord, Lord Malloch-Brown, will make sure that as far as he is concerned, the House will be treated with a bit more seriousness, especially when reports of this importance are produced.
	The report should be required reading for anyone trying to understand the complexities of the kind of action that can most appropriately be taken against a nation whose policies and practices we find abhorrent and against whom we feel that action is required short of war. For me, as someone who is not at present a member of the committee, and so did not attend the hearings, reading the transcript of the session with the noble Lord, Lord Renwick, was particularly illuminating. He was explaining that sanctions were often seen as the only alternative to doing nothing or taking military action when he was interrupted by the noble Lord, Lord Lawson, who said that there was indeed a fourth option, namely subversion. There was then a lively short discussion about the extent to which subversion could play a role in dealing with an unsavoury regime before the discussion got back to its main track.
	The conclusion of the noble Lord, Lord Renwick, born out of his experience in South Africa and elsewhere, that sanctions policy in the case of any country, whatever the starting point, must be intensified or relaxed according to the country's behaviour, seemed to me to be a good basic point. In a way, his evidence underlined the conclusions of the report that economic sanctions are not a straightforward all or nothing policy. They can be counterproductive if they are not carefully applied and they are unlikely, even in the best and most successful circumstances, in isolation to engender major policy changes in the target country.
	Given that sanctions at best have a patchy success rate, the obvious first question, which was answered most eloquently by the noble Lord, Lord Lawson, is why bother with them at all? The answer is that in some cases the alternative is to do nothing, and that is something that we find morally or politically unacceptable, and not only those of us in the UK. An interesting point made by the Foreign Office Minister in his evidence was that the number of cases of economic sanctions being adopted by the international community in recent years has increased significantly. We feel that we must do something. Moreover, as several noble Lords have pointed out, despite all the imperfections, economic sanctions are not inevitably bound to fail in all circumstances. Therefore, if we are to impose sanctions, it is important that we take a realistic view of what they can achieve and consider other supportive measures to bolster them.
	In that respect, a valid point was made by the noble Lord, Lord Renwick—that economic sanctions are more likely to work in countries with more sophisticated economies. The best example is South Africa, where sanctions played a major part in persuading representatives of the business community that the apartheid regime was a major block to their continuing success and interest. It is no surprise, therefore, that it was the business community that took the lead in initiating discussions with the ANC and played a major part in pressurising the apartheid regime to change its policies. They did not do it because they were bleeding-heart liberals, but for hard-headed economic reasons. South Africa is at one end of the scale but, at the other, economic sanctions against a poor, unsophisticated economy with a small international trading sector are less likely to have a significant effect on the regime. In such countries it may well be that the humanitarian cost will outweigh any benefits unless the sanctions are carefully applied.
	Today's debate has understandably spent considerable time examining the current situation in Burma. Apart from its topicality, Burma demonstrates both why sanctions are often adopted and why they are often ineffectual, at least in the short term. For many of us, Burma falls squarely into the "something must be done" category. Recent TV pictures with the whispered reports of Fergal Keane and shots of a frail-looking Aung San Suu Kyi impel us to do something, however symbolic that may be. We know, however, that sanctions in this case are unlikely to bring about policy or regime change in the short term, for at least three reasons. First, many in the military do not care. They are used to isolation and they are doing very well on it. Secondly, the sanctions are not universal. The regime can and does, as has been pointed out, trade with China and other of its neighbours and will continue to do so. Thirdly, even if you could get comprehensive sanctions in the sense of every country taking action against Burma, the army, given its current position, is, in the words of the noble Viscount, Lord Eccles, like actors in a Greek tragedy who cannot change and will not change even if it brings everything down with them.
	What is the alternative to sanctions in Burma? As the noble Lord, Lord Ramsbotham—whom we must commend for the eclectic nature of his current reading list—pointed out, Thant Myint-U, the Burmese academic who has worked for the UN, has argued that we must swap sanctions for a combination of foreign aid and what he calls serious diplomacy involving the Burmese Government and their neighbours. One of the most encouraging—arguably the only encouraging—news items this week is that Lee Kuan Yew has for the first time expressed his disapproval of the activities of the regime in Burma, and one only hopes that that call for a change of policy is adopted by some of the other senior statesman in the region.
	I do not doubt that in the long term that sort of pressure may be more effective, but at present it would be very difficult for us not to adopt a policy of continuing sanctions, the principal aim of which is to demonstrate our repudiation of what the Burmese Government are doing. It is also interesting to note that the junta, in offering to speak to Aung San Suu Kyi, has made it a condition that she drops her support for sanctions. That could be just a cynical ploy to put up a barrier that it knows she will not cross, but it may be that the junta is feeling the pinch and that sanctions are a substantive consideration.
	In respect of Burma, will the Minister elaborate on the Answer he gave to an oral Question on Tuesday when he said:
	"All bets are off in terms of the right set of sanctions that may be required to put pressure on Burma".—[Official Report, 9/10/07; col. 127.]
	Will he place some bets to the extent of telling us the Government's current view on going forward with sanctions against Burma?
	We are faced with a whole raft of countries at the moment against which sanctions have been adopted. I read in the newspapers this morning about the very dramatic effect of sanctions currently imposed by the Israeli Government in Gaza where sanctions have led to a collapse this year in industrial production of 90 per cent and in agricultural production of some 50 per cent. That seems a classic case of where sanctions are likely to be counterproductive. Does the Minister share that view?
	Burma and Gaza are particularly hard cases for the reasons we have discussed. However, if we look at some of the other countries—Libya was mentioned as an historical example—where sanctions have or might be imposed, there is scope for introducing an element of targeted sanctions with the prospect of at least some limited positive effect. The report makes a number of sensible suggestions in this area. It talks, for example, about conflict diamonds, which have not been discussed so far in the debate today, and points out that if one is to be successful in imposing sanctions, there needs to be an effective monitoring and enforcement procedure. I am sure that the committee is right to suggest that a permanent UN team should be established to assess trade in conflict commodities and the value of sanctions more generally. It is surely a source of real regret that the negative approach of the US to the UN means that, in the short term at least, it is unlikely to have the resources to enable it to set up such a much-needed team.
	A final area of targeted sanctions that has been discussed is that of financial sanctions. The report rightly points out that this area has not had great success in the past and, as an example of the best that it can do, quotes the case of three individuals from Côte d'Ivoire who bucked up their behaviour for six months as the result of financial sanctions. The noble Lord, Lord Brennan, got it right. The world financial structure is changing to make it much more of an interconnected global structure, as we discussed earlier this week in respect of Northern Rock. Therefore, the area of financial sanctions, although its track record is pretty limited and weak, offers more productive scope in the future. I hope very much that further work, as he suggested, will be done in that area.
	I have no doubt that there will be demands for economic sanctions as long as governments behave in a manner that the international community finds abhorrent, and that for all their imperfections, sanctions will be imposed in the future. The report is an invaluable guide on how such sanctions might have the best effect.

Lord Howell of Guildford: My Lords, this has been a super-topical debate. I know that we always say these things are timely, but this one is right on the nail, given the horrific events developing in Burma, which we have not seen the end of yet. We must all be extremely grateful to my noble friend Lord Wakeham, his team and his committee for producing this report and for promoting the debate. My only comment on the Government response, which is also available to us, is the same as everyone else's; namely, that it is a rather limp affair, consisting of a long list of paragraphs all of which begin with the point that the Government do not share the view of the committee on this, that or anything else. That does not take us very far. It is one of those reports that has obviously been written by a word processor.
	The obvious conclusion from this debate, and from any rumination on the whole sanctions scene, has to be that sanctions are a very mixed success. The noble Lord, Lord Brennan, and other noble Lords made a point that is made in the centre of the report. Sanctions, if they work, do not work in isolation from the whole menu of policies and pressures, from the diplomatic—as the noble Lord, Lord Hannay, said—to the openly forceful, and from the soft-power range of activities, right up to the range of hard-power activities which can be deployed in either a fully military or a semi-military form.
	Those conclusions emerge from this debate and, probably, any debate on sanctions. Whether they are good or bad, the UK is involved in a whole range of sanction regimes—our own, the EU range and UN sanctions activities. Right across this range there have been obvious failures where nothing has happened. There have been successes, in some sense, although the noble Lord, Lord Skidelsky, is right to remind us that it is extremely hard to measure what success really means. There have been weaknesses and strengths. Certainly, if the aim is merely to register disapproval, these are quite strong registers and messages.
	The key issue is whether sanctions hit regimes or people, or do they inevitably hit both, as my noble friend Lord Lawson argued? If the aim is to change behaviour or to make policy changes at governmental level, do they make the situation better or worse? The report strongly suggests that they make things worse. I shall turn to Burma in more detail in a moment. One cannot get answers to any of these things except by looking at examples, which the report does in a very interesting way. It looks at what went on in Iraq. One has to conclude that economic UN sanctions had an impact, but not of course in helping democracy or bringing benefit to the people in any way; however, there is evidence which the committee has that the then rulers of Iraq—Saddam Hussein and others—were influenced by the impact of and wanted to use the fact of the sanctions. That probably led to the scrapping of the programme of weapons of mass destruction in the early 1990s, which of course was missed spectacularly by our intelligence services and those of America and many others.
	Burma is in all our minds. We are reminded that a whole range of economic sanctions has been in place for years, including the UK's range of sanctions, which are more extensive than many others in Europe; namely, trade and investment sanctions, and heavy warnings and discouragements from the Government about getting involved in Burma at all. Have sanctions helped? The report is blunt and says that they have not. They have hurt ordinary people and made zero impact on progress to democratisation, which is very much the view so eloquently put by the noble Lord, Lord Ramsbotham, and I sympathise. It is evident that all the cries of disassociation and disengagement stay away. Sanctions are much argued about, particularly on the so-called "compassionate left" of politics, but have had the opposite results and merely caused enormous suffering among a people who are longing for more contact, not less.
	Whether the sanctions work or not, at the centre of this is the truth—the inconvenient truth, if we can use that rather dreary phrase—that nothing in this region will work without China, India and Japan, and probably without Russia, on board and several other cutting-edge Asian countries. There are signs that China is being a little more helpful at the UN, which is welcome. But the reality is that economic sanctions cannot work on a partial western-only basis. For more than a decade some of us have tried to bring home to policy-makers in the Foreign and Commonwealth Office, think-tanks and elsewhere, which can think only in terms of Brussels and Washington, that the foreign policy community now must embrace the rising Asian powers. Perhaps that should be the "risen" Asian powers because they have already arrived. The Atlantic community is no longer the centre of the globe. We get bogged down in the regional politics of Europe at our peril.
	The report looks at Iran where sanctions have not had the slightest effect in limiting Iranian ambitions in the nuclear direction. I know that this raises the much broader question of what is to be done about Iran and how it is to be contained. We have to reconcile ourselves to the fact that it is obviously the future regional power in the area and has already caused an enormous amount of trouble and further destabilisation rather than further settlement of the Middle East.
	The report analyses other forms of sanctions in a very interesting way, which is very useful; namely, targeted sanctions, the famous travel sanctions, and financial and commodity sanctions. The conclusion is that targeted sanctions must hit their targets. Obviously, when we see dignitaries from Zimbabwe—or, indeed, Burma—travelling around, we have to ask whether these sanctions in any way are hitting their targets.
	Financial sanctions are very interesting and one is torn between views. With totally globalised and integrated financial systems and banking systems, does this make the operation of very precise sanctions against particular areas of an economy of a rogue nation more or less easy to put in place? My instinct is that with modern technology there are new and refined ways of making precision impact through financial and banking sanctions. But again we have to return to the bigger point made by my noble friend Lord Lawson. None of this will be of the slightest use unless the Asians take the lead, not merely that they co-operate. The western banking system, just like the western political system, or the Washington theory of hegemony, is no longer valid. It is the full co-operation of the rising Asian powers that is needed.
	As the noble Lord, Lord Newby, has just remarked, commodity sanctions work if there is a controlled and tightly policed and monitored system. We have had difficulties with conflict diamonds in that respect. One could argue for another form of sanction—I am not sure that it is mentioned in the report; namely, the suspension or withdrawal of aid programmes, which Japan is now considering. It is rather curious that Japan is now one of the major aid donor countries in the world. Its original post-war aid programme began in Burma as it sought to make reparations there, but it is now reviewing these programmes in order to put pressure on the regime. I do not know whether it will work, but it is thinking about that.
	Missing, surprisingly, from this otherwise excellent report is any reference to cyber-sanctions, which may be the most important part of the future of the sanctions system. Anyone who has studied Russian cyber-attacks on Estonia recently will have seen how immensely powerful these can be. This seems to be an important new area in Iran, which some people are looking at, but it does not seem to have reached policy-making at all. This may also be true for Burma. One of the first things that the junta did as the situation got rough the other day was to cut off internet links—or try to do so—but they may well find that it has cut off lifelines to its own regime as well. The reality, which is not widely discussed but is there, is that all Governments rely increasingly on network computer technologies and on mobile telephone networks and are therefore increasingly vulnerable to cyber-attacks. I hope that that has not escaped the minds of policy-makers, even of this Government.
	Those who say that there is no area between sanctions or military force are out of date. There is an area opening up now between conventional economic sanctions and the use of force, which could have devastating effect, paralyse Governments, cause suffering inevitably to populations but, above all, disable or undermine the efforts of governments to continue imposing strict and centralise regimes. Those are the thoughts that I have to add to the report and debate and I hope that they can be taken into account when the Minister replies.
	The conclusion of all of us generally is that sanctions are never the complete answer. They work differently in different circumstances and have to be supported by a whole range of other activities, which is the approach that we have to take. This debate and the report have helped us to focus on those issues more clearly.

Lord Malloch-Brown: My Lords, I start by thanking the noble Lord, Lord Wakeham, and his committee for this report. If he feels that there has been any lack of enthusiasm from the Foreign Office in its response, let me try to correct that this afternoon, at least.
	In listening to this very interesting discussion, I have the sense that the divisions between us are not that wide, as so often happens in this House. Every noble Lord who has spoken accepts that sanctions are an imperfect tool and that we are continuously trying to improve them. While some may conclude that the imperfections rise to such a level that one must question their utility at all, the sense of the House as a whole seemed to be that the way to go is to exercise prudence, control and continuous review to ensure that, when we employ sanctions, we employ them effectively while constantly evaluating results and making corrections if we find that those results are not in line with our policy objectives.
	Noble Lords have mentioned some of the great wins that have come from sanctions, such as South Africa and Rhodesia in the past and Libya more recently, as well as even less noted successes, such as the willingness of the Iranian regime to at least sit down and negotiate its nuclear programme, or of the regime in Khartoum finally to move, if only slowly and grudgingly, on Darfur. All those indicate the usefulness of sanctions as one arrow in the quiver. That will be the main theme of my response today: that between the two extremes of hard and soft power, the last being just the blandishments of diplomatic persuasion, there lies an area—as the noble Lord, Lord Howell, said—which should be defined not as sanctions alone but as sanctions plus, as a set of both economic disincentives and economic incentives, which can add a robustness and forcefulness to our diplomacy but falls short of employing military action against those whose policies we seek to change.
	The main issues that have arisen in addition to the case of Burma are more broadly about the humanitarian impact of sanctions. Can we target them so as not to do greater harm to the innocent, broader and often very poor population? Secondly, there is the critique that we all agree we need to make of UK sanctions policy.
	The report claims that the Government,
	"repeatedly adopts sanctions with little sense of whether the objectives can be achieved or of how sanctions can contribute to the achievement of those objectives".
	The Government do not accept that that is correct. In recent examples—Iran and the DPRK—we followed what we think has emerged as the correct UK policy. We imposed smart and targeted sanctions and played a role in designing sanctions that targeted the nuclear and missile programmes of those two countries, which were the areas in which we wanted to bring about a change of behaviour.
	The point has been made about the difficulty of exiting any set of sanctions, but we felt that in these cases the criteria for suspending and terminating the sanctions were carefully crafted, including benchmarks that focused on the development of a nuclear weapons programme and avoiding areas of other legitimate activity. In the case of the DPRK, we are already seeing positive results, with the remarkable progress that is now being achieved in the six-party talks. Similarly, on Iran, we believe that sanctions have sparked internal debate that has resulted in a decision to engage with the International Atomic Energy Agency on a work plan to address these outstanding issues. Similarly, targeted measures on Sudan, Liberia, the Democratic Republic of the Congo, the Ivory Coast and others have, we felt in each case, been appropriate and proportionate in terms of applying pressure for change, contributing to bringing the warring parties to the table to resolve those conflicts while minimising the broader impact on civilians.
	The case of Burma has given topicality to today's discussion. The committee was correct to highlight that case and correct, too, in its judgment that the EU autonomous sanctions have not delivered the change that we all hoped for. Equally, we should acknowledge, as several noble Lords have said this morning, that the prospect of additional sanctions proposed by the Prime Minister and other European leaders has helped to sustain international pressure on the regime in recent weeks. The further sanctions being considered in the EU over the coming weeks are intended to put further pressure on the Burmese authorities by targeting the particularly profitable parts of Burma's economy to initiate an inclusive process of reconciliation.
	Having said that, I concur with the remarks of the noble Lord, Lord Howell, in that without the Asian dimension there—without ASEAN, China, India and Japan being part of an international sanctions regime imposed through the UN Security Council—the effect will be limited. The noble Lord, Lord Newby, and other noble Lords have made similar points. We have moved past an era in which western sanctions alone can have the effect that we intend. Indeed, in a situation where there are western sanctions and other economic trading partners simply take advantage of that to increase their own involvement in a rogue state's economy, our influence becomes net lessened, so it is enormously important to bring the world with us in terms of sanctions regimes.
	Let me answer the query on how far I expect us to be able to go in the case of Burma. I bring to the attention of noble Lords an article by the Singaporean Foreign Minister in the media this morning in which he affirms ASEAN's strong condemnation of developments inside Burma and calls with equal force for reconciliation and for the UN envoy, Mr Gambari, to take the lead in securing a dialogue between the two sides. He feels that pressure needs to be applied, but is clearly cautious about moving swiftly to sanctions and, I suspect, at least in the first phase considering incentives rather than sanctions as the way forward. But that is the process that a UN Security Council discussion will steadily allow us to move on. The special envoy will return to Burma. He will come back to report on progress or the lack of it. As the process continues, if no further progress is made, there will be an opportunity to make the case for the world to join in on firmer action against the regime in Burma.
	I echo the noble Lord, Lord Hannay, and others who pointed out in their contributions that clearly not just the regime, but Aung San Suu Kyi herself, believe that this call for sanctions is having a real impact. That is why the regime has raised it as the first issue it wants her to drop as a demand if talks are to begin between the two sides. So when last week the Prime Minister said that he was committed to securing tougher EU sanctions, including a ban on foreign investment on top of the sanctions against individuals and their assets as well as measures aimed at specific commodities, we should look at that as just the first step in a process which needs to broaden this to include the Asian economic partners of Burma as well.
	I turn to the humanitarian impact of sanctions. The Government's policy is based on a 1998 Whitehall review which recommended that sanctions should be targeted on specific individuals or groups, and be "smart", with clear objectives and criteria for exit. Since then we have sought to ensure that what we do meets those cases. Rightly, attention has been focused on Iraq and the early, very damaging impact of comprehensive sanctions on the ordinary people of that country. But we have to acknowledge that once that impact was recognised, the Oil for Food programme, despite its other major failings, was enormously successful in improving the living standards of poor Iraqis within a sanctions framework. In fact, the Volcker commission, which investigated the Oil for Food programme and did not find much to applaud in it, nevertheless noted that the feeding programme and humanitarian purchasing programme,
	"reversed a serious and deteriorating food crisis, preventing widespread hunger and probably reducing deaths due to malnutrition. Undoubtedly, many lives were saved".
	So it is possible to protect ordinary people within a sanctions regime. Indeed, looking at the success of sanctions, I note the observation of the noble Lord, Lord Howell, that sanctions may have been the cause of the end of the WMD programme in Iraq. That is no small achievement if it is the case.
	A further point to note is that since the comprehensive sanctions measures against Iraq were lifted in 2003, there is at the moment no proposal anywhere to apply such comprehensive sanctions against any country. Indeed, the UN has imposed such measures only four times, in Rhodesia, Haiti, the former Republic of Yugoslavia and Iraq. While we do not rule them out—all noble Lords could think of a few heinous candidates for sanctions—the fact is that they are not regularly used now precisely because of the kind of limitations to which the committee so properly drew our attention. We have to focus on targeted measures which avoid the major failings that were described.
	I want to say a word about the financial issues. First, financial sanctions are getting more sophisticated, reflecting the sophistication of global banking systems where moneys are moved easily between countries. The experience of the United States in being able to disrupt banking systems in the cases of the DPRK and Iran demonstrates the potent power of these new smart financial sanctions to achieve diplomatic objectives.
	I shall respond to the specific request of the noble Lord, Lord Hannay, about the recommendation of the panel of which he was a part to smarten up the UN's own sanctions arrangements in the Security Council. I am afraid to say that despite strong support from the UK both for its work in general and for the proposal of the panel to which he referred, the Working Group on General Issues on Sanctions of the Security Council has been discontinued because others did not share our commitment to its activities. Nevertheless, through other means the Security Council is similarly reviewing the effectiveness of sanctions and improving one important exit issue, which is how to delist individuals once they have proved that they do not belong on a list of those who should be subject to sanctions.
	Perhaps I may say a word in favour of what was said by my noble friend Lord Brennan: do not underestimate the effect of financial sanctions. In the case of al-Qaeda and the Taliban, more than $85 million-worth of assets have been frozen in 36 countries. In our own case in terms of our sanctions against Iran, more than £500 million-worth have been held. These are numbers which can have a striking effect on a country's willingness to change its policy line and comply with UN Security Council resolutions or other policy objectives of the UK Government.
	I close by repeating the observation of a former colleague—indeed, my former chief—Kofi Annan, the former Secretary-General of the United Nations: between war and diplomacy, we need a middle way, and often that is sanctions.

Lord Wakeham: My Lords, I thank all noble Lords who have contributed to what has been a very interesting debate. I have listened to many debates over the years, and it is not often that I am able to say at the end that every single speech was itself well worth listening to. I am extremely grateful to all noble Lords who have spoken.

On Question, Motion agreed to.

EU: Schengen Information System II (EUC Report)

Lord Wright of Richmond: rose to move, That this House takes note of the report of the European Union Committee on Schengen Information System II (SIS II) (9th Report, HL Paper 49).

Lord Wright of Richmond: My Lords, those noble Lords who are frequent travellers and therefore make a habit of handing over their passports for the inscrutable gaze of a border control official may not have given much thought to the means by which that official acquires the information enabling him, or nowadays more often her, to decide whether you should be allowed to leave or to enter the country. I had not given the matter much thought myself until the sub-committee I chair embarked on the inquiry which led to this report. But the principle is clear. There is no difficulty for a single country like the UK to give all its border controls computerised information from the national police and immigration authorities, but when two countries abolish such checks at a common border, those controlling the external borders of the two countries need to be armed with the relevant information from both countries. And when the majority of the member states of the EU decided, as they did at Schengen, to abolish their common borders, a major computerised initiative is needed to supply all their external borders with all the relevant information. That initiative was the first Schengen information system. It began operations in 1995 and by 2001 it applied to all 15 member states except the United Kingdom and Ireland. The special position of the United Kingdom is a point to which I shall return.
	The SIS is not merely an instrument for border control. The availability of information throughout the European Union has made it a major instrument for law enforcement. Let me give two examples. A car stopped in member state A has been listed as stolen in member state B. This will be clear from the check on its licence plates, so a police officer of state A will be able to detain the driver and inform the authorities of state B. A person who has escaped police custody in state C is the subject of a European arrest warrant which is listed on the SIS. If he is stopped in member state D, the police officers will be able to arrest him.
	The subject of the report we are debating today—the second Schengen information system, SIS II—is needed for two reasons: to allow for the enlargement of the European Union and to enable biometric data to be included. Any European Government interested in policing and law enforcement would surely be eager to join the SIS and, as soon as it is up and running, SIS II, or so one might have thought. The United Kingdom obtained approval to participate in the SIS from the beginning of 2005. The UK database should have been ready by then but was not. We were told in evidence that the reasons were technical problems and related to an act of God—the fire at the Buncefield oil depot, next to which the police national computer and the UK SIS terminal were located. But as the fire took place in December 2005, I hope that the Minister will explain to us why the UK was not already in a position to take part in this important law enforcement tool at the beginning of that year, and why the Government have now abandoned any attempt to join the first SIS.
	We know that the reason is not so that the UK can be among the first states to join SIS II. The start-up date for that was to have been later this year but is now to be December 2008. Yet we were told in evidence by Home Office officials that the UK's aspiration was to join in 2009, and expert witnesses subsequently put this back to 2010. The Government, in their response, agreed that the UK,
	"should be ready and able to participate as early and as fully as possible",
	which I would have taken to mean December 2008. But in July the Parliamentary Under-Secretary of State at the Home Office told us that the UK connection was,
	"due to go live in 2010".
	On "Channel 4 News", she subsequently said that the date would be April 2010, and confirmed this last week in a letter to my noble friend Lord Grenfell. In her Channel 4 interview, the Minister gave as a reason for the delay the unique technical difficulties for the UK of having 80 different users of the police national computer to connect to SIS II. The committee was allowed to see the list of those 80 users. Nearly all are simply different police forces, and I cannot see why the list should not be made publicly available.
	In her letter to the noble Lord, Lord Grenfell, the Minister says:
	"This is a complex programme which we need to ensure we get right".
	Is it really more complex for the United Kingdom than for other large member states? They, too, have to get it right. Why are these problems incapable of resolution within the next 14 months?
	As your Lordships know, the United Kingdom has retained its own border controls so is not a full participant in the Schengen system, nor will it be a full participant in SIS II. It will not obtain access to SIS immigration data, the list of persons to be denied access to the Schengen states. There are legal objections. Even if there were not, the Schengen states would surely object to our obtaining this information without opening our borders. Yet some of the immigration data are valuable for purposes other than border control. They include, for example, alerts about aliens who, if admitted, might pose a threat to public safety or national security. We devoted a whole chapter of our report to the question of whether, without obtaining access to these data for border control purposes, we might nevertheless obtain access for policing and other law enforcement purposes.
	The Home Office, in its written evidence to us, agreed that there might be operational merit in this; so did witnesses from the Serious Organised Crime Agency. The problem was the technical one of enabling the computer system to differentiate between data supplied for border control purposes and data supplied for security purposes. At present such differentiation is not possible, but no witness suggested that it was impossible. Access by the UK to this information would be valuable not only for the security of the United Kingdom, but for our EU partners as a whole. We urged the Government to see whether it would be technically feasible to devise the future SIS II system so that it could differentiate between these classes of information and, of course, we urged them to do so as soon as possible as the system was already in development. The Government declined to do so.
	If the Home Office had followed our recommendation, I believe that they would have had support at the highest levels. In his Statement to the other place on national security, the Prime Minister referred to,
	"the importance of enhancing existing co-operation to share more information between police and immigration services, and internationally across countries: within the European Union, to enable British law enforcement authorities to access immigration information on existing European Union databases".—[Official Report, Commons, 25/7/07; col. 843.]
	But, as I say, the Home Office rejected our advice. It said, as is true, that there were legal problems about access to this information and added that the Government were challenging the interpretation of the relevant provisions in the Court of Justice. The response continued:
	"If and when the UK is able to access these alerts we will explore with our EU colleagues the technical and operational issues which arise".
	I find that incomprehensible. The time to explore the technical issues was six months ago so that if the UK was still legally unable to access all this information, it might still be able to access that part of it essential to national security.
	What did the Government have to lose by beginning immediate discussion of the technical issues? At worst, they would have discovered that differentiation between the categories of data was not technically possible. They would then have been no worse off. I ask the Minister why his department took that attitude. It may still not be too late for him to see if the technical problems can be resolved. However, he may now be told that this might have been possible six months ago but that matters have now progressed too far.
	Data protection issues also inevitably arise when an enormous volume of personal data, some of it highly sensitive, is held on a database accessible by law enforcement officers throughout the European Union. Here we have the problem that the immigration provisions of SIS II, being a First Pillar matter, are governed by a regulation that is itself subject to the First Pillar data protection directive while the provisions on co-operation in criminal law and policing are governed by a decision under the Third Pillar. Because there is as yet no Third Pillar data protection instrument corresponding to the First Pillar directive, the decision has its own tailor-made provisions. I think the late Lord Weatherill, who proudly carried his tailor's thimble in his pocket, would have agreed with me that the tailor who made those data protection provisions was not a master of his craft. They differ from those of the regulation, sometimes for good and comprehensible reasons, but often not. We criticise the provisions of the decision as being unduly complex. The Government disagree. We, however, have in support of our view the evidence of the Deputy Information Commissioner, who described it as a mixed picture that his office had difficulty in following.
	The data protection provisions of the decision differ not only from those governing the regulation but from those governing other Third Pillar instruments, such as the decision transposing into EU law the provisions of the Prüm treaty. What is needed for the Third Pillar is a single data protection instrument, performing for the Third Pillar the function that the directive performs for the First Pillar. That instrument will be the long-awaited data protection framework decision, the DPFD, that we have been promised for some time. The first draft was published two years ago. Shortly after the publication of our report, a fresh draft of the DPFD was brought out and negotiations began again in earnest. The Portuguese presidency has said that it would like the DPFD to be adopted at the Justice and Home Affairs Council next month. Only last week, negotiations took place that may have led to a final draft. We have yet to see it, but I fear that it may do little to simplify this complicated issue, and in particular to clarify what will happen when there is a conflict between its own general provisions and the particular provisions of the SIS II decision.
	The last main issue I wish to raise is biometrics. As I have explained, the inclusion of biometric data is one of the main reasons for the development of SIS II. Initially these are likely to be fingerprint and photographic data, but in due course also DNA profiles and retina scans. Biometric data are exceedingly valuable but not infallible, and the consequences of false matches can be serious. A case cited by the European data protection supervisor in his opinion on SIS II is that of a lawyer from Portland in the United States, who was wrongly identified as a terrorist and detained because his fingerprint successfully matched one found in the Madrid bombing. The match was subsequently shown to be flawed. The European Parliament also had reservations about the use of SIS to identify third-country nationals on the basis of their biometric information. So did some of our witnesses. Even the witnesses from the Serious Organised Crime Agency, who have much to gain from improved identification methods, told us that biometric systems can be designed only to search for an acceptable degree of similarity and can be set for a high, medium or low degree of correspondence.
	The Commission is due to report on the availability and readiness of the relevant technology. I hope the Minister can tell the House whether biometric searches will be available as soon as SIS II becomes operational. Is he satisfied that when they become available they will be sufficiently reliable? What provisions will be in place to allow for cases of wrong identification to be corrected and for the protection and compensation of the individuals involved?
	I hope our report has made it clear that the committee regards SIS II as an extremely valuable weapon in the fight against crime, and is disappointed that the Government apparently see so little urgency in signing up to it. However, we would also be concerned if, once it applied to this country, the right of the public to protection from crime was not adequately balanced by the rights of individuals to protection of themselves and their personal data. I hope the Minister will be able to reassure us on these issues and on the others I have addressed. I beg to move.

Lord Teverson: My Lords, I thank the noble Lord, Lord Wright, for the way in which he chairs our sub-committee and the way in which this comprehensive report has come out. Anyone reading the report—as I am sure everyone here has, in full—might get the impression that it was about a dry subject, but it is not. To me, it is very exciting. It is about one of the three freedoms we have as part of Europe: the movement of goods, the movement of capital and the movement of individuals. Fundamentally, the subject of the report is the delivery of that third freedom to us as citizens of Europe.
	There are three parts to that—three sides of the triangle. First, there is the obligation for the freedom of movement. To make that possible we need to ensure, in opening borders or giving that freedom, that we know something about the people who are moving, particularly third party nationals. We then have to ensure that those data are properly looked after and guarded in terms of their use. It is those areas that the report looks at.
	Schengen itself was originally the result of five member states saying, "We want to make freedom of movement something that is meaningful to citizens, so that you don't just have the theoretical right but you can actually go from one member state to another without having to prove who you are or show identification". That was agreed in 1985, and it took until 1995 to deliver it with the Schengen states. I think they had to remodel Schipol airport four times before they could make it work with the new traffic flows that were needed. This is an exciting part of our freedom as European citizens. Regrettably, as UK citizens, we are completely excluded from it. We have to show our passports and are denied what many of our fellow European citizens are allowed.
	The report brings out a number of key issues. One of them is, frankly, mismanagement. There are few other cases I have come across where the Council of Ministers has said to the Commission, "My goodness, you've made such a mess of this so far that when it comes to SIS II we're not going to allow you to be the management authority". SIS II is late in delivery. The contractual arrangements were disputed legally, and the Commission and the supplier had a public spat involving court cases. Already the expenditure is expected to be €150 million—although, with the paucity of information and assessment of the process beforehand, we do not actually know if that is the case or what the cost-benefit ratio is behind it. There are a number of areas of bad management; so much so that the Commission has had to invent an SIS I and a half, called SISOne4All, just to ensure that the new member states that joined in May 2004 can become, as we promised them, a part of this greater European concept of freedom of movement.
	One of the things that I find staggering about this—it is an area in which Europe regularly fails—is that it could have been predicted. I used to be involved in regional funding in the European Union. When one period of regional assistance funding ended—as happened at the end of last year—suddenly there was a rush to make all the decisions to get the programmes in place for the next period. However, it was known back in 1999 that the next regional funding period would commence in 2007. As a citizen one wonders why the relevant people did not predict that event in 1999 and get on with planning for it. As regards this agreement, as far back as the mid-1990s we knew that member states would join the European Union and yet the Commission failed utterly, and the Council failed to a degree, to have this system ready when accession took place in 2004, let alone in 2007.
	The noble Lord, Lord Wright, mentioned the important hybrid area of data protection. Frankly, no ordinary citizen can understand the difference between pillar 1 and pillar 3 in the European Union, yet we have no data protection worthy of the name within the European context except perhaps in the Council of Europe—a completely different body. I believe that under the reform treaty we shall, thank goodness, abolish pillar 3. Perhaps we can then have sensible data protection in all areas.
	As regards Schengen more generally, I am very disappointed that the UK, and therefore the Irish Republic, do not participate in this system. That is very counter- political-culture and the Daily Mail has challenged all those areas. However, as a European citizen and taxpayer I see it as a benefit to be able to travel freely within the European Union. I should like to think that the British Government will rethink this big division that we have put up between us and the other member states in terms of our leadership of Europe and our aspirations to be a proper working part of Europe. We use our status as an island nation to excuse our stance on this. However, Iceland, which is not even part of the European Union, is part of Schengen, as is Greece with its many islands. If we belonged to Schengen and could participate in all the third pillar areas, we would have access to much more data which would make our lives more secure. I know British men and women whose spouses are third nation individuals who cannot holiday together easily in Europe as a family because the spouses cannot easily obtain Schengen visas. Therefore, the United Kingdom is at a disadvantage in this whole area because it is not a member of Schengen. It seems to me the ultimate irony that if there is one nation in Europe that is proud of its independence and its security vis-à-vis anti-terrorism, it is Switzerland. It is not even a member of the European Union, yet a couple of years ago it agreed through a referendum to become a part of this process.
	A number of questions arise in terms of the United Kingdom and SIS II. It is a great disappointment that we never engaged in SIS I although we had the opportunity to do so. We appear to have no wish to do so either. I hope that that will change in terms of SISOne4All. Why are we not trying to become a part of that in the third pillar areas? In terms of SIS II we seem to be very much at the end of the queue. Once again we are not even playing a Championship League role in the European Union. Will we try to rejoin SIS I or SISOne4All given the delays elsewhere? Will we try to get ourselves in front of the queue rather than at the end of it for SIS II because it would give us the ability to have more security information? Will the Government move away from the tabloid risks and disquiet with freedom of movement and, like me, celebrate being a part of the European Union and try to be a whole member rather than a part-time member?

Lord Marlesford: My Lords, the subject of this report is as esoteric as it is important, and it is as important as it is esoteric. It is not headline stuff but, my goodness, it is headline stuff if what it is about goes wrong. I pay special tribute to our Clerk, Michael Collon, whose clear mind has helped us to distil in the report the crucially important points in the SIS II controversy. I just hope that Ministers have read the report; if we were merely writing for a few defensive Home Office officials, we have probably been wasting our time.
	I have faith in the potential of the noble Lord, Lord West of Spithead, who is to reply to the debate. He comes from a world where incompetence and lack of action and initiative can cost lives. That is a great asset that he brings to the Government. I hope therefore that, with the full support of the Home Secretary, who has made a good start, he is driving forward his own ideas and plans to protect the internal security of our country in what is already a period of very great danger.
	The biggest threat comes from those Islamists who have perverted their religion into a political ideology and formed a Trotskyite-type political party—Hizb ut-Tahrir. The object of that group, which of course encompasses the mission of al-Qaeda, is to overthrow by subversion and terrorism the democratic system of the West and then to use military force to introduce a world caliphate. That it has not a hope of achieving this is clear. But it is equally clear that its efforts are already proving immensely disruptive to lives in the West and will result in much bloodshed. Anyone who doubts any of that should read The Islamist by Ed Husain.
	I entirely support the Government in not signing up to the Schengen agreement. I fear that I disagree with the noble Lord, Lord Teverson, with whom I agree on many other matters. The geography of the UK means that we can and must defend our borders at the points at which people enter or leave. Frankly, I prefer that system, which is more British, to the continental system whereby the borders may be open but you can be stopped down the road by checkpoints. "Vos papiers, monsieur", is a common demand in France but not yet—I am glad to say—in Britain.
	There has been some resentment among Schengen countries that we are not full members. The other countries in the EU always object to our not taking a full part in everything European. They have used this to deny us full participation in the Schengen information system. The EU Commission is still preventing us from getting the immigration information that SIS II will collect. That is in spite of the fact that that the UK taxpayer is contributing a full share to the cost of the Schengen information system. We received a letter from Vice-President Frattini of the European Commission, telling us that the best way of guaranteeing full access to the Schengen information data is to participate fully in Schengen. That should be wholly unacceptable to Her Majesty's Government.
	The response of HMG has been pathetic. Informally, we are told that they are relying on quiet diplomacy. In their response to our report they say that they will have to await the judgment of the European Court in the Frontex case, which is expected next year, and that, if and when the UK is able to access these alerts, they will explore with our EU colleagues the technical issues which arise. Frontex is the proposed European frontier force being formed to deal with the very real growing threat of unmanageable immigration at flood levels. I should explain that the EU commissioners are trying to prevent us participating fully in Frontex. The feebleness of dealing with these issues of access to information is Whitehall at its worst. I wish that when the Prime Minister invited my noble friend Baroness Thatcher to tea at No. 10 he had asked her for the loan of her handbag.
	I might add that I am glad to say that Sub-Committee F has embarked on an investigation into Frontex and that, in addition to a highly skilled international lawyer as a special adviser for the inquiry, we have secured the services of a recently retired major general to advise us on the logistics of Frontex.
	The Minister will probably realise that my chief interest in this subject is practical. I believe that this Government have been inexcusably dilatory as regards making our borders secure to prevent malefactors getting in or out. Only now is the e-border being introduced at points of entry and there is no sign of them yet at points of exit. Most of us have probably been in and out of the UK during the Recess and we have been able to observe at first hand the permeability of our frontiers.
	I wonder if your Lordships realise that Hong Kong had electronic control of its borders two years before Britain handed over that territory to China in 1997. Although passports themselves were not at that time electronic, the details of every person arriving in or leaving the territory were entered into the Hong Kong Government's computer system before they were allowed to pass. I would like to make a practical recommendation to the Minister that he gets in touch with the British official in the Hong Kong Government responsible for the system up to the handover and seeks his advice on how we might proceed in this country.
	I would underline the point made by the noble Lord, Lord Wright, that the UK obtained approval to participate in SIS from the beginning of 2005—nearly three years ago. Now the Government have abandoned that and said they will join only SIS II. That is due to open in December 2008. Yet, as the noble Lord, Lord Wright, told us, the junior Home Office Minister says that the UK connection will not be ready to go live until 2010. That is not good enough.
	Your Lordships may be astonished at this delay. I am not. It is par for the course for the Home Office. Perhaps I may remind your Lordships that on 1 October 1997, Section 39 of the Firearms (Amendment) Act came into force. It required the Government to set up a central register of all those who have applied for or been granted a shotgun or firearm licence. There have been years of Home Office sabotage. I use that word advisedly, having discussed the failure to implement the amendment with a succession of the Minister's predecessors—and that is the message they have given me. They have tried again and again to persuade the Home Office to implement the will of Parliament. Not until March 2006 was the National Firearms Licensing Management System rolled out to all 43 police forces. Even now, it is not linked to the police national computer, because police forces are still engaged in a data-cleaning exercise.
	I have had a number of Parliamentary Answers from the noble Lord about the administration of the UK passport system, which is integral both to SIS II and to the security of this country. These Answers reveal several disturbing facts. I would like the opportunity of a discussion of these matters with the Minister outside the Chamber.
	I urge the full and proper use of biometrics. The uncertainties of biometrics are directly proportional to the number of biometrics used. The impact of the error rate of one biometric for identification can made negligible if three biometrics are used. That is fairly elementary mathematics.
	Finally, I recommend that the Home Office, in its search for using SIS II to protect our borders, makes the fullest use of algorithms, which aid the efficient use of multiple sources of information. I urge the Minister, if he has not already read it, to look at a piece on this subject on page 93 of the 15 September issue of the Economist.

Lord Harrison: My Lords, I, too, thank the noble Lord, Lord Wright of Richmond, not only for so ably introducing this debate but for chairing our committee over a number of years with enthusiasm and wisdom, for which we are all grateful. In that, he has been well aided and abetted by Michael Collon and his excellent staff.
	I have a lot of sympathy with the report as we have produced it and the opening speech by the noble Lord, Lord Wright of Richmond. However, I have some sense of the difficulties that the Government face in dealing with these matters. The treaty exchanges and negotiations next week are only a background to trying to deal with such a difficult subject as the Schengen information system II.
	We have an impoverished debate about the European Union in this country at the moment. The mood of Euro-scepticism has gripped not only most of our blinkered media but some of our political colleagues. One of the casualties of that has been our approach to many important issues on the European level, including Schengen, particularly the Schengen information system and now the Schengen information system II, which is the subject of today's debate. Instead of adopting a sensible approach in partnership with our European partners to tackling serious crime and heightening our internal security, we have had to compromise because of the need to placate the Euro-sceptics in the press and other media.
	I base my own full-throated support for the European Union on the single European market, to which the noble Lord, Lord Teverson, referred. I believe that the single European market, which encourages the free movement of goods, people, services and capital, is the route by which we convince people that the European Union is worth while; it brings prosperity and jobs in that way. But I have heard less articulated the fact that, if you create a single European market that is beneficial, you also create a market for those who use the free movement to help organised crime, to traffic people or to present themselves as terrorists. That is why we so badly need a template of protection over that worthwhile single market—one that protects the market and, most important, protects the people moving within and around it.
	Like the noble Lord, Lord Marlesford, I have high hopes of my noble friend Lord West of Spithead, and perhaps he will accept my very warm but belated welcome to the Government Front Bench. In a former incarnation, he had the safety of the British people and this island at heart, and I, too, hope that he has not so changed, chameleon-like, as a new Minister that he has forgotten the importance of and need for those security objectives. I hope that he casts his cold analytical eye on these political issues and recognises that, if we absent ourselves from Schengen and the information systems allied to it, we may present less secure protection for our people than might otherwise be the case. I hope that he will be indiscreet in his reply and say that he, too, shares some of those worries.
	I hope that my noble friend will also reply to the question about joining up late. Is it to be 2010, and what form is SIS II to take? I also agree with the noble Lord, Lord Marlesford: it seems peculiar that, when we ask what the difficulties are, we are told that we need to consult 80 other organisations and there will be difficulties there. We discover that most of those organisations are our own police forces. It seems to me that it is a question of, "Physician, heal thyself". If we have not organised ourselves in this country the best to share information about criminals, how can we expect to do so at the higher level? I have always been an enthusiast for a national police force. We may not go there but we need to have a good system within our own country if we are to be effective at the European level—which, in time, I hope we will be.
	Being outside Schengen and having a semi-detached status produce difficulties. Again, I hope that my noble friend will tackle some of those issues, or at least recognise that problems are associated with them. Another difficulty comes from excluding ourselves from access to immigration data while maintaining border control priorities. Sometimes the difficulty is defining which elements of SIS II will be available to Britain. That does not make life easy for those whom we charge with the important task of defending Britain.
	Has my noble friend had further thoughts about what the Minister, Joan Ryan, said when she came before the committee on 29 November 2006? I asked her about the cost of the Schengen information system and the fact that we pay a pro-rata rate of 18 per cent without having full access to the information so produced. I asked her whether she felt that that was value for money, and clearly she did not. I said:
	"I wholly agree with you about that, but do you acknowledge that we are missing out on information we might otherwise obtain?".
	The Minister replied:
	"I do entirely, and part of my brief is to access exactly that information we have been discussing today".
	We are spending £0.5 million on the subscription to SIS II and £3 million to £4 million on increasing the infrastructure by which, in time, it is to be implemented, but will my noble friend report to us whether he is satisfied that that money is well spent or whether it could be better spent if we stepped over the line and joined Schengen and all the elements associated with it?
	Can he say a little more about progress on the data protection framework decision, which has already been alluded to by our chairman and the noble Lord, Lord Teverson? Can he also say whether the European Commission is charged to promote an information campaign about SIS II with the national supervisory authorities? What intelligence can he give us about that? What, if anything, is being done on that score? Member states themselves—that is, us—are required to ensure that citizens are fully informed about SIS II. What is the UK doing? Does it apply to us? In paragraph 159 of the report we talk of greater transparency,
	"in co-decision negotiations between the Council and the European Parliament",
	to arrive at a satisfactory conclusion.
	We have always wanted to promote transparency within the European Council but in this area, we say that we are concerned about moving too far and too fast. We look to the six-month review to slow things down. I wonder whether my noble friend can bring us up to date on that as well.
	We have also inquired as a committee—and have been rebuffed by the Government—about getting regular updates on the progress and preparations for SIS II. Can the Minister think about that again? It is important to have regular updates and not to wait until the end to know if progress is being made and whether it is going along the right lines. It gives the process a highly desirable momentum.
	Reference has been made to the Irish Republic and its absence from the Schengen system. What is the state of play between us and our colleagues in Ireland? Are we discussing this matter actively? Are we thinking about their future, our future and the future of the European Union, which should see us sharing this vital information to rebut criminals of all sorts? We should be sharing this information together to offer the template of protection that is so urgently needed for the development of the single market.

Baroness Ludford: My Lords, it is a great pleasure to take part in this debate on an excellent report from Sub-Committee F. I do not think that it is purely my national pride, which leads me to say that Lords EU Committee reports are much appreciated in Brussels. It is their quality that recommends them.
	The consolidation of an area of free movement of persons is one of the key EU projects and SIS has been an essential compensatory tool for lifting controls at internal borders, offsetting it with not only the reinforcement of the common external borders but delivering security through the exchange of information.
	SIS II is now essential to accommodate enlargement of the area of free movement and also to take advantage of developments in information technology. SIS II is intended to be more consistent, uniform and secure, but also more flexible, easier to manage, better performing and capable of integrating new data, new functions and the interlinking of alerts.
	I am a member of the Civil Liberties, Justice and Home Affairs Committee of the European Parliament and the SIS II proposals were carefully scrutinised by that committee not least because the European Parliament had a co-decision—on the regulation. We sort of got quasi co-decision on the decision. I also followed them closely because I am the Parliament's rapporteur—lead member—on the visa information system, which is a biometric database set up to improve the management of visa policy but also having spin-off security benefits. It was important to secure coherence between those two large-scale databases, which will share the same technical platform and will be managed in the future, we hope, by the same management agency.
	The European Parliament, like the committee, was critical of the lack of an impact assessment for SIS II similar to the lack of an impact assessment for the daughter of the visa information system, which I am now dealing with, which is the measure on the collection of the biometrics for the VIS. It is rather perverse that, as a result of the European Parliament's input, there will be specific impact assessments on particular aspects of SIS II once it is functioning—on the transition to a management agency and, before biometrics can be used for identification purposes, one-to-many searches—but there was no global impact assessment on SIS II itself. Perhaps if we had had the global one, we would not have needed all the specifics.
	Because the Parliament had co-decision, we were able to effect some considerable improvements, many of them in line with comments in the sub-committee's report. The first area was, of course, that of data protection and supervision of the system. Parliament's suggestions to improve data quality and limit retention periods were accepted. We succeeded in strengthening supervision, with an increased role for both the European data protection supervisor and national data protection authorities. We insisted that any use of the data for police investigative purposes—that is, other than that for which it was entered—must be linked to a specific case and be justified on serious national security grounds; in other words, to stop fishing expeditions and profiling. We also insisted on publication of the list of agencies allowed access to SIS II and a ban on transfers to third countries.
	The report commented on the differing data protection regimes between the regulation and the decision; the noble Lord, Lord Wright, highlighted that in his introduction. This is partly because the normal "first pillar", as it is called, data protection directive applies to the regulation. For the decision, we had to seek ad hoc rules—principally, as was pointed out, because we suffer from an overall data protection regime in the law enforcement third pillar area. The European Parliament has been demanding this for the past decade. It is quite scandalous that we still lack it. We had a Justice and Home Affairs Council meeting in September which apparently reached some kind of agreement but a pretty unsatisfactory one, diluted from the high safeguards that this House and the European Parliament have demanded. Unfortunately, the European Parliament is only consulted on this; we do not have co-decision.
	The European Parliament secured other safeguards. On IT security, we insisted that SIS II should be treated as critical infrastructure, so that it got that degree of protection. On management, as I have said, we insisted on a parallel solution for the Schengen information system II and the visa information system. This will allow consistency of provision by the European data protection supervisor. We insisted on regular evaluation reports, as well as the publication of statistics on alerts, hits and access given to the system. All of this will improve transparency and audit.
	On biometrics, we secured that not only should there be quality checks before biometrics are entered, in order to reduce the risk of errors, but also that there should be this review, evaluation or specific impact assessment before one-to-many searches are allowed. Of course, before DNA or iris scans were ever to be entered into the system, there would have to be an amendment to the legislation, as was pointed out. Lastly, on the European Parliament, I would highlight the rights of information, the right to deletion of unlawfully stored data given to individuals and the right to know, subject to certain national security criteria, what is held on an individual.
	I accept one reproach pointed out in the report: the lack of transparency in the negotiation process. We have been under pressure and have, to a considerable extent, accepted what are called "first reading agreements". Instead of going through the longer process of having a first reading, going back to the council and then coming back to the Parliament for a second reading, we concertina it all into one agreement which is then voted on by the plenary of the Parliament. We are quite new in co-decision for this justice area, and perhaps we need to look at how that is working and get some guidelines on good practice. Certainly, in handling the new report on the collection of biometrics to go in the visa information system, I will insist on a committee vote before we go into negotiations with the council because third parties will then be able to see what is being voted in the Parliament.
	The European Parliament is not responsible for the delays in setting up SIS II. They were largely because of problems in the tendering procedures for procurement. We hope that the interim solution of SISOne4All will not be done at the expense of the development of SIS II, which must remain the priority.
	On the question of UK participation, we are awaiting the judgment by the European Court of Justice in the Frontex and biometric passports cases. However, on 10 July the Advocate-General published an opinion that was not encouraging for the UK and essentially rejected the UK position. UK access to SIS II immigration data and the visa information system database for policing purposes depends on the outcome of the case because the council is making a declaration to accompany the VIS decision to say that while UK and Irish access would enhance the shared security of member states, which is the case, it would be kept under review while awaiting the jurisprudence. The "the UK cannot have its cake and eat it" argument is widespread, and we will have to work hard to overcome the feeling that the benefits of UK access in shared and reciprocal security outweigh the feeling that we are trying to cherry pick from Schengen.
	The reform treaty is much needed to rationalise powers in legislative decision-making to produce consistency between the first pillar border and immigration area and the third pillar policing and law enforcement area. On the whole, that is expected to happen. However, the UK red lines and what the Government call "opt-ins" and some people call "opt-outs" will not bring the clarity, efficiency and accountability that many of us would like. I feel that that is regrettable and will weaken our influence and input in constructing the area of freedom, security and justice. If matters are complicated now with regard to UK participation in Schengen and other justice, immigration and policing measures, I fear we ain't seen nothing yet as compared with when the reform treaty is in place.
	Finally, I fear that the position of UK MEPs taking part in co-decision matters in the European Parliament on Schengen and other JHA measures will come under creeping challenge. I wonder whether a British MEP would be able to be the rapporteur on a co-decision report when the UK is not taking part in future. That will weaken the ability of UK MEPs to advocate special treatment for the UK—which is unfortunately how it is seen—even though we will do our best to argue that the substantive benefits are worth the fact that we are not legally fully taking part.

The Earl of Listowel: My Lords, I rise as a member of the Committee of your Lordships' House that produced this report to speak briefly about some of its recommendations and, in particular, about our consideration of the need for a legislative impact assessment, the absence of which we regret, before the development and introduction of SIS II and the need carefully to monitor the impact of SIS and SIS II in use. I thank our chairman, my noble friend Lord Wright of Richmond, for his leadership. I much regret that following Prorogation he is obliged to move on. It has been a great pleasure serving under him.
	The Schengen Information System is principally a large database. As such, it is a technical matter. Perhaps it has not received sufficient scrutiny in the past because the subject is rather dry by nature, but, as has been said by several noble Lords, it is crucial to the effective protection of the public that the system exists. So I am particularly grateful to our Clerk, Michael Collon, and the specialist adviser Professor Steve Peers for their assistance in making such a technical subject fairly easy to understand. I also thank the noble Lord, Lord Avebury, who, with his profound knowledge of immigration and data management, was of great assistance to me as someone who is new to the area. I know that he regrets being unable to speak this afternoon because of a long-standing family engagement.
	I turn to the impact assessment. In his evidence to the committee, Mr Peter Hustinx, the European Data Protection Supervisor, said that,
	"the absence of an explanatory memorandum is highly regrettable ... Moreover, one can only regret there has been no impact assessment study. The fact that the first version of the system is already in place does not justify this, since there are considerable differences between both".
	That is SIS I and SIS II.
	I was grateful for Her Majesty's Government's reply to our report, which noted that in future developments of SIS II there will be such an Explanatory Memorandum and impact assessments. Over the period 2007 to 2012, €114 million will come out of the EU budget to bring SIS II on line. The public deserve to know how their tax money is being spent. They need to know that careful consideration is being given to how it is used. Sensitive information is held in this database. To keep public confidence in the European Union, every effort should be taken to make plans clear to the public before they are implemented.
	For the same reasons it is important that the implementation of the Schengen Information System is carefully monitored. In our report, we recommend specifically that:
	"Full and clear statistics must be published at regular intervals, and should include ... the number and type of alerts per Member State ... the number and type of hits per Member State ... the use of the SIRENE system for each type of supplementary information exchanged by each Member State; and ... actions taken following a hit for each type of hit and for each Member State".
	The reply of Her Majesty's Government highlighted that some of that information is already required. The final recommendation—that there should be information on action taken on following a hit—was rejected. I recognise that this is perhaps a complicated extra step, but we need feedback on how this is being used if public confidence is to be sustained.
	I also highlight the important work of the Schengen evaluation team which provides ongoing assessments of each Schengen member, and their implementation. Their reports are not published publicly; a reduced version is given out. I encourage the Minister to ensure that as much information as possible is made public, and that every support is given to the Schengen evaluation team in its work—clearly it is politically sensitive—and that any concerns are properly responded to by the relevant states.
	The Government provided us with a list of about 80 agencies in this country which can have access to the Schengen Information System. This we are not permitted to record in our report. It would be very helpful if the information on agencies with access to the Schengen Information System was made available as soon as possible. As my noble friend Lord Wright said, we really cannot see why that information should be so sensitive.
	It is important that the Schengen Information System II is implemented and that we join it as soon as possible. I am sure that the Minister agrees that as soon as it goes live, we should be part of it. How is the legislative framework necessary to do so proceeding? I understand that the Minister's response to our report highlighted that it has become apparent that there is a legislative obstruction to that. How far have discussions with the Crown Prosecution Service proceeded to reassure us that there will be the capacity within the CPS to meet the new demands that will come with membership of SIS II? My noble friend Lord Wright of Richmond and the noble Lord, Lord Marlesford, highlighted the importance of having as much access as possible to the immigration system. We recognise the limits on that, but if it is possible now to amend the Schengen Information System so that, although we cannot have access to border control information, we have access to law enforcement information, I think that the Minister will agree that we must take that step urgently.
	The Schengen Information System II is dry and technical, except for someone as experienced in these matters as the noble Lord, Lord Teverson, but it is also vital for the protection of the public from serious organised crime and contains sensitive information about our citizenry. I trust that the Minister can now assure us that we will be able to join SIS II as soon as it goes live and that there will be in place the necessary monitoring to ensure that information about the public is not misused.

Lord Wallace of Saltaire: My Lords, this report refers to the sub-committee's previous report in 1999 on Schengen and the UK's border controls. I was then the chair of the sub-committee that produced the report, before my noble friend Lady Harris of Richmond, and now the noble Lord, Lord Wright of Richmond, took over, and was thus deeply engaged in the earlier discussions about how far Britain's national interests were best protected by the complex opt-out, opt-in arrangements that we have achieved.
	Years before that, when I was still a researcher at Chatham House, I recall chairing a seminar with some senior policemen in 1989 on European co-operation among police forces. I was very struck by the senior British police who argued very strongly that if the crime crosses the border, police co-operation has to cross the border as well. Some complained that the Home Office was very happy for them to do so, but did not want to make that formal because then it would have to admit what was happening to Parliament. So there is nothing very new in where we are now. I am glad to see the noble Lord, Lord Stevens, nodding as I make that remark, because it is a well-known story within the police forces.
	Our concerns in that previous report were about how far Her Majesty's Government had protected Britain's national interest. The Labour Government had come in at the tail end of the Amsterdam negotiations, much of which had been conducted by a Conservative Government who were desperate to hide from the domestic media and from their own party how closely we were engaged in that level of co-operation. We were therefore concerned about the Government's contradictory—one has to say almost dishonest—approach of opting out, but then asking to opt back in again to as much as possible.
	The problem that we had then and still have is of the gap between a political stance of assuring the Daily Mail, the Sun and the Conservative Party that British sovereignty remains unscathed by EU integration, while British law enforcement agencies recognise the necessity and desirability of active engagement because of cross-border crime, the rising number of British citizens living elsewhere within the European Union, the rising number of European Union citizens now living in the UK and, as the report makes clear, the increasing problems that arise from British families of mixed nationality, especially because we are outside the Schengen area.
	Roughly speaking, some 1.5 million UK citizens are now living part time or full time elsewhere within the European Union, primarily in France, Spain, Portugal and Italy. Many of them are good, solid Eurosceptics, reading the Telegraph or the Daily Mail delivered to Andalucía, but who nevertheless want to take part in local elections to insist on their rights while they are abroad.
	Around 1.5 million EU citizens from other countries now live in the United Kingdom. We learnt during the French presidential elections that some 300,000 French citizens lived and worked in London. A Dutch Minister told me some months ago that some 50,000 Dutch lived in London. There are Swedish and German schools in London which also contest that there must be substantial communities and, as we know, 500,000 EU citizens from the new member states of Poland, the Czech Republic, Estonia, Latvia and Lithuania now live and work here.
	We have to accept that that has implications for the way in which British law enforcement authorities operate. I recall nine years ago when I visited the National Criminal Intelligence Service the enthusiasm with which senior British policemen talked about the possibility of recovering stolen property in trucks as they crossed the Franco-Spanish border because they could now get the information to the border authorities there before the truck arrived, and how much that improved Britain's crime solving capacity. My conclusions then were that, in the long run, it would be more honest and in Britain's national interest to join Schengen and then to negotiate an opt-out to maintain the British border checks, given the particular pressures from third-country immigrants to enter the United Kingdom.
	I am convinced from the Amsterdam negotiations that we could have achieved that objective and that would have been more strongly in Britain's national interests. But it would have required Her Majesty's Government to admit to Parliament and the public the depth of their engagement in European co-operation in policing, immigration, asylum and data exchange. Instead, we have a highly complex and deliberately obscure set of arrangements. I managed to acquire from the Government some months ago a list of our opt-outs and opt-ins. It covered several pages and required very considerable reference to other documents. Of course, that makes it extremely difficult for anyone outside our own sub-committees to understand what is going on.
	The United Kingdom does not have access to immigration data, although Tony Blair as Prime Minister once said that Britain's frontiers were now in the Mediterranean. I noted in the New York Times some months ago a report that Punjabis are now being flown to African airports in the hope that they can take boats in Senegal or further south to the Canaries and get into Britain that way. We see reports that there are camps around Cherbourg that threaten to repeat what happened some years ago in Sangatte. It is very clear that Britain has to co-operate fully with European border controls and European immigration because, as we well know, a large number of these immigrants from third countries want to end up in the United Kingdom. That is why we are a special case.
	There are strong arguments for transparency and accountability throughout the European Union as a whole and within the UK, as the report makes clear, on matters of civil liberty and data protection. All member Governments share responsibility for the obscurity of these negotiation processes. Indeed, I recall that our last committee report was the first time that the Schengen acquis had been published. We had a great deal of difficulty getting hold of the Schengen acquis, which had been incorporated into the Amsterdam reform treaty. When we finally got hold of it, the bits that we had were in three different languages with very different typescripts.
	However, there has been a particular British contribution to obscurity; that is, the British and French insistence that matters should be divided between the Third Pillar and the First Pillar, and that Britain should be allowed to be a semi-participant. As my noble friend Lady Ludford said, it is recognised that semi-participation leads to a loss of influence by Britain over the processes. We learn in the report that the German Government, for example, clearly over-enter names in the Schengen system, which causes problems for the rest of us. Our Government should be in there arguing about that sort of thing and ensuring that the system works properly for the benefit of the whole.
	I note the immense irony in the Government's response to this report; namely, that Her Majesty's Government are going to the European Court of Justice to challenge the European Union's current interpretation of the Amsterdam Treaty and the protocols that we negotiated in 1997. HMG are trying to use the dreaded European Court of Justice, so feared on the Conservative Benches of this House and the other House, to gain rights within the European Union or perhaps to correct the mistakes that they made in negotiations nine to 10 years ago.
	I regret that the Government have refused in their response to provide regular reports to Parliament on progress so far, but I welcome their statement that legislation may be necessary to implement this Bill, thus ensuring a degree of proper scrutiny and debate. The report makes clear that a range of UK adjustments are needed; namely, additional staffing for the Crown Prosecution Service, publication of the number and names of UK agencies with access to the SIS, clarification of the degree of overlap with Europol and Eurojust, and, as some of us have raised in other contexts, the arrangements made to allow the transfer of information held on the Schengen Information System to third countries, above all the United States.
	In our previous committee report we recommended that Britain should recognise the degree of our integration with the European continent and the sheer scale of travel between Britain and Europe, by planning that ports of entry should be able in future to separate those arriving from within the EU and those arriving from outside the European economic area. That has not been done in the planning of terminal 5 and elsewhere, and it was a huge missed opportunity. We have to do a great deal more to address the rising number of mixed nationality families.
	To conclude, British national interests are at stake in a world in which the number of people who cross the Channel has risen and continues to rise. The number of those who live across the borders of Britain and our neighbours also continues to rise. Sadly, the Government remain extremely cowardly about the British domestic media, leaving a wide gap between the practice of co-operation among border control agencies and law enforcement agencies and the pretence of Britain standing alone.
	The Government response says:
	"Member states are also required to ensure that their citizens are properly informed about the Schengen Information System II".
	Hear, hear. I hope that the Minister will assure us that they will be properly informed.

Viscount Bridgeman: My Lords, I, too, thank the noble Lord, Lord Wright of Richmond, and his committee for initiating this debate, for which we are very grateful. It is particularly heart-warming that so many members of the committee have taken part. From these Benches, I would also like to welcome the noble Lord, Lord West of Spithead, in what I believe is his first reply in a European sub-committee debate. These debates are such an important part of this House.
	We on these Benches welcome the report and, broadly speaking, are able to support most of its conclusions. Of particular interest is the degree to which the Government are willing to follow the sub-committee's recommendations and their ability to give more precise assurances on the progress of our preparations to connect to the SIS II database.
	I was encouraged to see that, in the Government's response to the committee's conclusion and recommendations, Joan Ryan MP stressed:
	"The Government is fully committed to fighting cross-border crime".
	Combating crime in a Europe with increasingly open borders should be a priority. The SIS database is, as most noble Lords would agree, an essential tool in that fight. Why then has it been two and half years since the Schengen provisions were put into effect? That question has run through our debate. The UK has been given permission to participate, but we are still not linked to the SIS database. Is the Minister not concerned that potentially dangerous criminals could slip through the net, as they have for the past two and a half years?
	Has the difficulty which the Government have evidently experienced with regard to the database taught them anything about future large-scale IT projects, such as the national identity register? It is essential that the Home Office learn from the numerous problems that have occurred in the development and implementation of the SIS to avoid the mistakes that the Government are too fond of repeating.
	Will the same problems delay the effect of the second generation of SIS? The Government maintain in their response that they are committed to providing the necessary resources to join SIS II as quickly as possible. I echo other noble Lords in saying that if after two and a half years we could not connect to the older SIS, then the Government's idea of "as quickly as possible" is not fast enough. The current timetable indicates that we might link into the information on the SIS database in 2010. How realistic is that timetable?
	The noble Lord, Lord Wright, said in a press release that accompanied the report:
	"The Government's fight to tackle cross border crime will be severely undermined by any delay in taking part in the second generation Schengen Information System ... The Government must do more to ensure the UK isn't left out in the cold".
	Will the Minister inform the House of the potential stumbling blocks or delays to our accessing the information on that database?
	I echo the sentiment expressed in the committee's report by insisting that more needs to be done, especially as doubts have been expressed about the Government's proposed timetable. Superintendent Mike Flynn, the director of the joint operational authority of SIRENE UK, expressed in his evidence to the committee the view that, even once the central SIS II was in operation,
	"new Member States, of which the United Kingdom will be one, will have a staggered integration into the system, and we would reasonably expect this to be about 2010".
	How right he was. The committee's report indicates that, in any case, the United Kingdom will be one of the last member states to join SIS II. It is my duty as the last speaker before the Minister to stiffen his resolve in answering previous questions, particularly those of the noble Lord, Lord Wright. Is he content for us to be one of the last states to join? It seems vital not only to express our interest in joining as soon as we can, but to be realistic about the timetable that would allow the United Kingdom to access important information about potential threats to our security.
	Under the 1997 treaty of Amsterdam—regarding which the noble Lord, Lord Wallace, made his usual friendly comments about my party's participation 10 years ago; the noble Lord, Lord Harrison, mentioned it too—the United Kingdom pays a full contribution of 18 per cent of the €140 million budget which the European Commission says will be spent between now and 2014. In terms of cost to the Home Office, that amounts to a £39 million entry fee to the system, plus an additional £500,000 a year as a subscription. Additionally, estimates for operating the system in the United Kingdom run up to £4 million a year. Does the Minister think it fair that we are committed to paying this amount, a full contribution to the Commission in addition to our own operational costs, but still do not have access to all of the data? It is simply another example of one of the great features of this Government: they throw money at a problem without considering what is being received. Is the Minister content to continue sending British taxpayers' money to Brussels without receiving the benefit of this investment?
	The United Kingdom's ineligibility to access immigration data from Schengen member states is codified in the treaty of Amsterdam and is essentially due to the fact that we have not acceded to the open border control aspects of Schengen. However, the report suggests that given the current climate, it may be desirable to attempt to access immigration data from other Schengen states—again, a point made during the debate. Will the Minister be following the report's recommendation to initiate immediately high-level discussions about the mutual exchange of immigration data between the United Kingdom and other member states? Indeed, does he believe that there is scope for amending the treaty of Amsterdam to allow access to SIS II data in this area? Again, the noble Lord, Lord Wallace, spoke about that more fully.
	Additionally, given the significant financial input, does the Minister believe that it is in his power to press the Commission for greater transparency regarding the process of implementation? Transparency also seems to be a problem in the United Kingdom. I noticed that in the Government's response to the committee report, they claimed that publishing regular reports on the implementation of and connection to SIS II would only slow down progress and should be dispensed with. How many times have we heard that reply given by the Government on the question of regular reports? Aware of the substantial financial commitments, it is very important to know precisely the rate of progress, and considering the gravity of the issues involved, to balance the issues of civil liberty and national security. It seems that the failure to connect to SIS fits in with the overarching theme of the Government's administration: botched computer projects. It is sadly becoming a platitude in this House to speak of the Government's history of failed attempts at implementing large-scale IT projects. With the amount of money being poured into the system, we need to be able to see how things are progressing, and the Government cannot be taken at their word regarding this large computer project. I therefore say it again that Members on these Benches thus believe that regular reports on the progress of SIS II are essential.
	It is a disgrace that we must add our inability to connect to the SIS to the seemingly endless list of systems, such as the NHS, working tax credits, child support, the Rural Payments Agency, electoral registers and the Department for Work and Pensions. Indeed, an independent source notes that only 30 per cent of government computer projects could be called successes and has arrived at a figure of £14 billion annually spent on government IT, the equivalent of 7,000 new primary schools or 75 new hospitals. That comes from Computer Weekly. Is the Minister content that this Government's habit of failure has meant that we do not have control over the movement of potentially dangerous criminals?
	Another serious issue regarding transparency concerns not only the progress of the project, but SIS II itself. I would like an assurance that the Government will be pressing for safeguards from member states about the use of information on the SIS II database. The Government's response to the committee report indicated that as the list of authorities that will have access to the database has not been finalised, they will not publish even a provisional list. Again, that was a point made by the noble Lord, Lord Wright. As access to such sensitive information, including biometric data, obviously must be rigorously safeguarded, will the Government consent to publishing even a provisional list, or at least prioritising the publication of a final list of authorities in the interests of opening it up to parliamentary scrutiny? The very least that Her Majesty's Government could do is to publish the conditions under which these authorities would have access to this information and ensure transparency in this increasingly problematic state of affairs.
	This has been a fascinating debate and we await the Minister's reply with the greatest of interest.

Lord West of Spithead: My Lords, I welcome the opportunity provided by the debate to discuss the second generation of the Schengen information system, SIS II, not least because I have learnt a great deal about it over the past couple of weeks. To answer the noble Lord, Lord Marlesford, I have read the report—in fact I have read it twice—to make sure that I understand what is in there. In a moment I shall try to address all the points that have been raised in what has been a very useful debate, but first I thank the noble Lord, Lord Wright, and commend the European Union Committee's valuable and thorough work in its scrutiny of European legislation.
	The committee recognised in its report the value of the Schengen information system and the benefits which SIS II will deliver, to both the United Kingdom and all the other states which will participate in it. The Government are in agreement with the committee on this issue. As has been said, criminals do not respect borders, so it is vital that we develop a cross-border capacity to respond to crime. This includes co-operation with our European counterparts to share data such as those which will be held in SIS II.
	It is worth reiterating that, when the United Kingdom is connected to SIS II, it will enhance our law enforcement capabilities into Europe by enabling professional counterparts across the Schengen area to act on information entered on to the system in the United Kingdom. It will improve the effectiveness of the UK's police forces and other end-users by providing information that was previously unavailable; it will complement and support other Home Office programmes by adding an international dimension to several Home Office initiatives that have focused on delivering increased safety and security to our United Kingdom systems, and will be crucial particularly for the work that is being carried out on e-borders; it will enhance the effectiveness of existing schemes such as the European arrest warrant and the provision of mutual legal assistance, both of which we use at the moment.
	During the committee's inquiry and in the report which preceded this debate, the Government's commitment to the development of our SIS II connection was called into question, as, indeed, it has been throughout the debate. I reassure your Lordships' House that the Government consider SIS II extremely important as a crime-fighting tool and perhaps even more broadly than that. We are committed to delivering the UK's connection but we have to ensure that we get our connection right. The UK currently plans to connect to SIS II in April 2010, as has been stated. By being in place by then, it will give us added security for the Olympics and beyond that date.
	I believe that during the committee's inquiry into SIS II, some noble Lords who were members of the committee noted that they had experience of running major IT operations. Those noble Lords will therefore be only too aware of how difficult such programmes have proved, not only in the public sector but in the private sector. Indeed, if one looks at these kinds of large IT programmes, one finds that the private sector is just as bad as the public sector. That is not an excuse for not doing these things well but, goodness me, they are extremely complicated. When one looks back to SIS I, there were lessons there and things were done that may not have been done as cleverly as they should have been. We have taken those lessons to heart and are making sure that they are implemented in SIS II.
	We need very good programme management and continual review and refinement. I know from my previous incarnation, when I was heavily involved in some of these big systems, that it takes a very good programme manager to run them and we have got to ensure that one is in place.
	We cannot implement SIS immediately because it is an extremely complex system, as I have said, and we have to have the right regime to develop and test a robust solution. This includes not only the connections but having in place, within the CPS and elsewhere, all the mechanisms with which to make maximum use of this system. Speeding up the implementation of SIS II is not only a question of resource—although I have to say, as an aside, that we are putting a lot of resource into it, financial as well as people. Of course, when it comes to people, there is no doubt that within our country, I am afraid, people with the skills to do this kind of thing are a very scarce resource.
	It will curtail the timeframe for testing the solution if we do this wrongly with the police national computer, and that is the key work that has to be undertaken. We cannot run the risk of disruption to the operational effectiveness of the systems that SIS will connect to, and that is why we need to run through those programs. The PNC, as I am sure many noble Lords are aware, provides a vital day-to-day service to UK law enforcement services in their fight against crime and terrorism. We must make sure, through rigorous testing, that there is no chance of the SIS connection having an adverse effect on that computer.
	Given the United Kingdom's population, the implementation of SIS II will make us one of the largest participating states. We are also, as one of the larger states, coming to SIS from a much more technically complex operating environment. As has already been mentioned in this debate, the police national computer is used by over 80 agencies and serves approximately 250,000 users. To put things in context, there are currently 8.9 million name records on the police national database, which is more than the total population of some other Schengen countries. We also need to take time to ensure that all the end users are properly prepared to use the system. They need the right business processes to deal with the volume of traffic from other Schengen users accessing the system. We have often got that wrong when we have tried to introduce new systems into organisations. We have to get that right.
	I shall try to answer some of the specific questions that have been asked. The noble Lord, Lord Wright of Richmond, mentioned specifically the delay to SIS I. I have touched on that already. I do not think we should be proud of what was done there. It was more complex than we thought, and the timing became such that there was no point in continuing to put money and effort into SIS I because of the extra things that were going to be required and the date it was due to come online. We could see that, because of complexities and delays, we would end up producing this system by the time the rest of Europe had moved to SIS II, and that would not have made any sense, which is why the decision was made to knock that on the head and move on. There were a number of reasons for that, one of which was the incident at Buncefield, not so much because of the loss of equipment in the fire but because it meant that the scarce resource of people who have to do this work were focusing on the PNC standby computer for business continuity, and could not then put their effort into the work needed for SIS I. The decision to chop SIS I was right. It was expensive—it cost some £35 million—but we have learnt a lot of lessons from it which have been brought forward.
	We are putting resources into differentiating between police and terrorist data. It is quite difficult, but it is being looked at. We are trying to put filters in place, and there are some issues of legal approvals. We are putting work into it because I agree that it would be useful and valuable. We are looking at all these issues because we believe they will make us that much safer.
	I am aware of all the complexities and risks of biometrics. A number of speakers touched on the possible need for three types of biometrics in order to be certain. I am convinced that biometrics are the way to go: once you go down that route you know who you have got and who you are dealing with, and that is not the case at the moment. That is one of the key reasons why we needed to jump through to SIS II, and it is right that we keep moving forward in this area. I would like the ability to carry three types of biometric data for certainty, because we will then be that much more secure ourselves.
	I touched on SIS I, and I hope I have answered that question. Noble Lords referred to the ECJ case. We await the result of that case. We hope that it will give us access to the data that we do not have at the moment. That may seem like having our cake and eating it but I see it rather as letting the others have access to some of our data. There is benefit for both sides: it is not just one-sided. I prefer to think of it that way. However, we do not know how that case will be decided. Therefore, we are negotiating and looking at ways to get round parts of this measure to get data that we consider crucial.
	Noble Lords referred to the data protection provisions. We believe that there are sufficiently robust measures in place in that regard. We do not agree that the rules are unduly complex. The right of access to data held in SIS II is subject to the national law of the country in which someone applies for access. This means that the UK subject access rights are provided in line with the Data Protection Act. When SIS II goes live, if someone wants to find out what information is held on them they will be able to send a request to the UK's SIRENE bureau within SOCA. They should be able to get the data changed or removed. If they do not consider that their request has been dealt with satisfactorily, they can apply to the Information Commissioner, who will assess whether the data protection principles have been broken. He can issue an enforcement order if necessary to ensure that something is done. Alternatively, the person can apply to a court to have the data changed or removed. Therefore, I believe that circumstance is adequately covered. However, as several speakers mentioned, we are not sure whether legislation may be needed in that area which we did not originally think was necessary. That is being looked at.
	The noble Lord, Lord Teverson, referred to our not being a full member of Schengen. As a result of our geographic position and the threat posed to the UK by irregular migration and cross-border organised crime, we remain convinced that maintaining the UK's frontier controls is the most effective way to manage our borders. That is the Government's position. I am well aware of the concerns and difficulties that that causes but that is the UK Government's position and I am sure that it is the correct position for counterterrorism policy and other matters.
	Can we move faster on SIS II? I have already touched on the complexities and difficulties involved. I fear that if we try to move faster we could make the sort of mistakes that we made with SIS I. Am I fully happy with that? I would be much happier if we could come in as all the other nations join but it is just not achievable. To try to do it in a rush would result in our making the same mistakes as we did before. We must get better at these programmes; there is no doubt about that. We have a lot to learn and we should be ashamed at some of our performances in that regard. We are getting better at tackling these issues but it would not be clever to rush this.
	The noble Lord, Lord Marlesford, asked whether I had read the report. As I mentioned, I have read it twice and I hope that I managed to get its import. It is an important piece of work, as noble Lords said. When I heard that I was to tackle this issue I thought that it would be an appallingly dreary thing to have to do. However, it is not at all dreary and is crucial, and I thank the committee for producing the report.
	The 18 per cent that we give towards the SIS was mentioned and noble Lords asked whether it was worth the money. As we have not done well with SIS I and we must get a move on with SIS II, one could argue that this is not the cleverest use of that money. However, it would be wrong to try to pull it out temporarily and then put it back in again; that simply does not work. That is the reality of it.
	There was mention of the investigation of Frontex, which I welcome. I am always pleased that people are making use of a major-general; that is always a good thing. I will ask my staff to find out who the Hong Kong official was and look into that; I am always willing to take advice. I am very happy to talk outside the Chamber about those issues and to respond in Written Answers.
	My noble friend Lord Harrison touched on the 18 per cent issue, and I hope that I have answered that. I will look at promoting information campaigns about SIS II, which was touched on by some other speakers. Maybe we have not done that as much as we should. I did not have much knowledge of it, so I doubt that the average citizen has. I will look at how that can be done, because it is important to get this across. We are in regular contact with the Irish Republic to discuss these various issues. I hope that answers that point.
	I thank the noble Baroness, Lady Ludford, very much indeed for explaining things a little from the European side. That covered some of the issues that I was going to cover. She touched on biometrics as well, and I hope that I have covered that point. It is important that we get them here; they are an important tool to identify people. They help in dealing with identity theft and in so many other areas. We have to be careful, as a number of speakers have said. We probably need three markers, and there is work to be done to achieve that. This will be ongoing, but it is important and we should do it.
	A couple of speakers mentioned the lack of impact assessments. I was extremely surprised that there had not been any. Again, it comes back to the mechanics of how some of these things are done. We have learnt lessons, and we have to make sure that we do those things in future to get them right. I was asked whether I am going to ensure in my new role that I focus in the way that I might have done when I was head of the Navy and Marines to ensure that we look at terrorism. Absolutely. I worked through the summer on a number of studies, and there was a lot of work going on. I hope at some stage that we will be able to develop that and explain that to the House. There are already some things in place that have made us safer. I hope that we are achieving something useful there.
	The noble Earl, Lord Listowel, mentioned the publication of statistics. That is highly complex. I will look at that with officials to see whether any more can be done. I know that our answer was a very abrupt "no". I cannot make any promises on that, because sometimes there are complexities. A number of speakers asked about the naming of the 80 agencies involved, and I will also see whether something can be done there. If it is possible, I agree that the more openness the better; and I will try to achieve that.
	I will answer the noble Lord, Lord Wallace of Saltaire, on a couple of points. I have not yet found that the Home Office likes to hide things from Parliament. If I did find that, I would not be very happy about it. The noble Lord referred to a case of some Punjabis being taken to north Africa to get into the UK. I consider that to be a good case for maintaining our borders as we do at the moment. We have to be careful about that. The noble Lord also made a point about citizens being properly informed about where we are. As I have said, we should try to do that, and I will look at how that could be done.
	I thank the noble Viscount, Lord Bridgeman, for summarising a number of those points, which really helped me to think about what points to address. I talked about the dates for SIS II. We now have a well planned programme. We are using all the industry standards. There are recognised programme management methodologies, such as PRINCE 2 and Managing Successful Programmes. We are putting in proper scrutiny and appraisal. I would like to be able to promise 100 per cent, hand on heart, that all those dates will be met. I can say that we are looking at every single way of making sure that we achieve what we said we would achieve. That is why trying to rush when I know that we would not succeed would be wrong. We all know that these matters are complicated. The system is expensive, as has been mentioned. It will cost £79 million by 2016. There are initial costs of £39 million, followed by running costs and so on. We are putting a lot of resources into the system because it is so important.
	I hope that that covers most of the points raised. If I have failed to cover any, I will scan this debate and write to those noble Lords involved. I hope that I have addressed most of the concerns raised. We agree with the conclusion of the committee that SIS II will be of great benefit to the UK. I hope that I have conveyed how complex this programme of work is. Finally, I congratulate the noble Lord, Lord Wright of Richmond, and his team on this debate, which has been extremely useful. Thank you very much.

Lord Wright of Richmond: My Lords, I am most grateful to all noble Lords who have taken part in this debate. I thank particularly my colleagues on Sub-Committee F for their participation, not only in the debate, but in the very useful contributions that they all made towards the production of this report.
	I thank also the noble Baroness, Lady Ludford, because this House is lucky in continuing to be allowed to have a Member of the European Parliament sitting on our Benches. We have benefited both from her wisdom as a Member of this House and from her considerable experience as a Member of the European Parliament who takes a close interest in this subject.
	At the risk of impertinence, I welcome the Minister to the House. It is not long ago that we sat next to each other at dinner when the noble Lord was wearing rather different clothes. Like the Minister, I share personal experience of the horrific complications of IT programmes, of which I have previously spoken in the House. I have no doubt that this IT programme is as complicated as any. But I hope that the Minister's indoctrination into the subject of Schengen, which he said is only two weeks old—although I am deeply impressed that he has read our report twice—will enable and encourage him to keep a close ministerial eye on this subject. It is of enormous importance, as he acknowledged.
	He probably does not yet realise how often Ministers on the Front Bench are asked to define what is meant by "as soon as possible". This has been a rare occasion when the Minister has defined that. I can say only that I am disappointed that it is not earlier than April 2010. I very much hope that the Minister will keep a close eye on this and, if possible, bring forward our involvement in SIS II.

On Question, Motion agreed to.
	House adjourned at 3.13 pm